VAT on local suppliers seen forcing exporters to import

The top industry official representing electronic exporters in the country said the government’s proposal to impose value-added tax (VAT) on local suppliers of export-oriented companies would push the latter to depend on what would then be cheaper imports that, in turn, would “kill our local suppliers.”

Danilo Lachica, president of the Semiconductor and Electronics Industries in the Philippines Inc. (Seipi), said House Bill 5636 would make the prices of local supplies more expensive compared to their foreign counterparts.

Local suppliers of export-oriented firms, also known as indirect exporters, enjoy zero VAT in their sales under the present tax regime.

However, this perk—which has been cited as partly responsible for the industry’s competitiveness—would soon be removed under HB 5636 in favor of a 12-percent VAT on gross sales.

HB 5636, which was passed in the House of Representatives last month, is the first package under the government’s comprehensive tax reform program, a move which aims to lower personal income taxes while expanding the base of VAT amid new or higher taxes on consumption.