JFC urges simpler, prospective rules on VAT refund

The Joint Foreign Chambers (JFC) are urging fiscal authorities to address investor concerns on changing and confusing tax and incentive rules. Foreign business leaders are especially pushing for simpler rules on the value-added tax (VAT) that has to be paid when importing capital equipment, with the promise of a refund upon the filing of the proper claim.

In a letter to Finance Secretary Cesar Purisima, the JFC noted that fiscal incentives helped boost the country’s chances of being chosen as an investment location. “Both BOI and Peza offer duty- and VAT-free imports for capital equipment in priority sectors. Investors build their long-range business plans on these incentives,” JFC said.

However, JFC said that getting the VAT refunded was complicated and overly bureaucratic, with the Bureau of Internal Revenue (BIR) forcing applicants to go to court, and then causing delays in procedures in the Court of Tax Appeals and up to the Supreme Court.

“How can investors be encouraged to risk their money if they cannot rely on the solemn word of government?” JFC asked.

It noted that even when investors get favorable decisions in court, they still have to deal with motions for reconsideration by the BIR. As such, the group asked fiscal authorities and the courts to honor the rules and to implement any new ones prospectively in order to avoid disadvantaging businesses that have complied with previous rules.

JFC noted that it was in fact the BIR that initiated changes in the rules. “In fact, these petitions, appeals, motions for reconsideration and other technical tactics were initiated by the BIR, which itself has been changing rules via conflicting and difficult to understand (memoranda) over the years,” JFC said.

“We seek your assistance in addressing the unfairness in treating investors, both by the BIR and the Supreme Court. If the country wants productive investments and make fiscal incentives available to attract investors, then the government is also obliged to provide business-friendly rules and consistent procedures that will allow investors to enjoy what has been offered as incentives,” JFC said in the letter.

The letter was also sent to Cabinet Secretary Rene Almendras, Trade Secretary Gregorio Domingo, Energy Secretary Carlos Jericho L. Petilla, Finance Undersecretary Jeremias N. Paul Jr., Finance Assistant Secretary Ma. Teresa S. Habitan and Internal Revenue Commissioner Kim S. Jacinto-Henares.