The Department of Finance (DOF) is currently reviewing a policy that charges exporters in economic zones a 12-percent value added tax (VAT) whenever they buy local supplies and services, but a lawmaker says the department already agreed to suspending the tax.
During the online general membership meeting of business group Financial Executives Institute of the Philippines (Finex) Wednesday, Finance Secretary Carlos Dominguez III said they were already reviewing Revenue Regulation No. 9-2021, which took effect last month. He did not categorically say whether or not the tax would be suspended.
Albay Rep. Joey Salceda said, however, “the DOF agreed [Monday] to suspend RR 9-2021 pending new legislation that will correct the rule from the [Tax Reform for Acceleration and Inclusion Law or TRAIN Law].”
He said he held talks with both the DOF and the Bureau of Internal Revenue over the weekend. “We were supposed to have a hearing on Monday, but we deferred the briefing to Wednesday out of deference to [Dominguez], whose decision was to suspend the regulation first pending corrective legislation.”
The TRAIN Law, the first tax reform package passed by the Duterte Administration in 2017, enabled the 12-percent VAT prescribed in the DOF policy for exporters.
The second package, the Corporate Recovery and Tax Incentives for Enterprises Act, exempted them from this same tax, only to bring it back in the implementing rules and regulations.
Exporter groups representing companies in economic zones have called for the repeal of the BIR policy.
Salceda proposed to “just reiterate CREATE and defer the implementation of the TRAIN provisions to the next administration, when we have time to study and create more thorough system. CREATE seems pretty clear, so we definitely have to implement its provisions on allowing [registered business enterprises] zero-rating for local inputs.”
He said, “the exporters are already up in arms about this sudden chance,” while admitting that the policy “will affect the administration’s chances in 2022 without even generating incremental revenues. In theory, we will only generate revenues here if exporters are unable to pursue refund claims.”
In the same forum Monday, Dominguez acknowledged the conflicting provisions, saying: “Yes, we will review [the revenue regulation], and we will implement it according to the law. The law, unfortunately, is not very fair. There is one law in TRAIN and there is another provision in CREATE. We will implement it strictly as we are sworn to do.”
In a follow-up message to reporters, he said the review would be done this month.