BIR defers from clarifying fate of Peza-related tax perk

The Bureau of Internal Revenue (BIR) could not yet issue a clear answer whether or not Philippine Economic Zone Authority (Peza) would be able to keep its zero-rated VAT purchases of local goods and services, noting that the government is yet to have a “consistent” stand on the issue.

Uncertainty lingered during Friday’s public consultation for the TRAIN law, as Peza could not be assured that its over 4,000 registered companies could keep the zero-rated value added tax (VAT) of their local purchases.

READ: Fate of Peza-related tax perks uncertain

Instead, Peza was told that the issue still requires discussion. In the meantime, a source close to the issue told the INQUIRER that local purchases should remain zero-rated at least until a decision has been reached.

The confusion began when President Rodrigo Duterte vetoed the incentive in December last year, following the passage of the TRAIN law.

There is no consensus among government officials as to how this veto should be interpreted, but Peza insists that it should still be status quo, citing a previous Supreme Court decision, as well as another enabling provision in the TRAIN law that wasn’t vetoed.

Peza Deputy Director General Mary Harriet Abordo asked BIR to confirm during the public forum that the zero-rated status would remain.

Noting that she was also speaking in behalf of the Japanese Chamber of Commerce and Industry of the Philippines, Abordo asked if the perk would remain even if the government puts in place an enhanced VAT refund system.

This is because some export sales — which are currently VAT zero-rated — would be imposed a 12 percent-VAT once an enhanced VAT refund system has been implemented, among other conditions.

However, BIR Commissioner Caesar Dulay deferred from giving out a clear answer.

“A meeting has been scheduled among the concerned departments regarding the particular issue on the VAT of Peza-registered companies,” Dulay said.

“So with due respect, we would defer answering that question until that the meeting is convened so we can have a more consistent position from the government side to address the concern of Peza-registered companies,” he added.

What remains at stake is the status of local suppliers to Peza-registered companies, which yearly make P250 billion worth of sales, according to Peza Director General Charito Plaza.

These companies include those that belong to the manufacturing and the Information Technology-Business Process Management (IT-BPM) industries — both of which have been key sources of employment in the country.

Should the perk be slashed, this could be a greater disincentive to Peza-registered companies to source locally, opting instead to depend on imports, which are also currently being granted tax incentives.

This comes as Peza is trying to promote the local supply chain, which only accounts for generally around a quarter of materials used by Peza-registered firms.  /jpv