The Philippines remains relatively unattractive to foreign investors compared with its Asean neighbors as far as the tax regime is concerned, hence the government should swiftly move to reform the system, according to tax managers.
In a conference last Friday, Tax Management Association of the Philippines (TMAP) president Terence Conrad H. Bello noted that the country was lagging behind in the region covered by the Association of Southeast Asian Nations when it comes to attracting foreign direct investment (FDI), and partly to blame are concerns on high tax rates as well as tax rules being changed midstream.
“When multinational companies make their business decisions, if they see fairness in the tax system, they increase their FDI,” Bello said.
TMAP past president Rina Lorena R. Manuel also cited the lingering concerns among existing as well as prospective investors with regards the Bureau of Internal Revenue’s (BIR) Revenue Memorandum Circular No. 54-2014, especially its “120+30” rule on the refund of value-added tax (VAT) credits, a form of tax perk granted to investors.
Under the circular, the BIR said if the claim for VAT refund or credit is not acted upon by its commissioner within the 120-day period as required by law, such inaction will be automatically deemed a denial of the claim.
Local and foreign businessmen had lamented that the retroactive application of the strict “120+30” rule to all pending VAT refund applications may result in a large-scale automatic denial of claims.
While the BIR had already committed to business groups that the agency would ease the documentary requirements when securing VAT refunds to fast-track releases, Bello noted that the BIR had yet to issue any order or circular to implement the measure.
Bello said the financial attaché of the Japanese embassy had already made it known to President Aquino that Japanese firms would not infuse more investments into the country unless the issue on VAT refunds is resolved.
Besides addressing pending issues on taxation, the government proposal to bring down corporate income tax rates to 25 percent from 30 percent at present would also help bring in more investors, Bello said.
“Reducing the rate to 25 percent is a good starting point to minimize the gap with our Asean neighbors,” he said, citing that the average corporate tax rate in the region stands at 23 percent.