Industry groups are urging the government to immediately resolve the issue related to the imposition of value-added tax (VAT) on local purchases made by exporters.
The IT and Business Process Association of the Philippines (IBPAP), Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI) and Confederation Wearables Exporters of the Philippines (CONWEP) said the failure to address this issue may have “detrimental effects” to export sectors.
IBPAP, SEIPI, and CONWEP said in a joint statement that they have been awaiting the resolution on the VAT issue which is currently being finalized by the government through the Fiscal Incentives Review Board (FIRB).
“A solution has been promised by the end of the month which also coincides with the end of the first taxable quarter,” the export industry groups said on Tuesday.
The three export industries said they have claimed VAT zero-rating on their purchases consistent with existing “local regulations and globally accepted principles allowing for the sectors to remain competitive.”
According to these sectors, they understand that most of the government agencies involved in resolving the issue believe that there is “clear basis” for all purchases of exporters to be exempted from the 12-percent VAT.
The export industry groups added that the non-imposition of tax on the purchases of exporters is not only allowed by the rules but “is more importantly critical in ensuring that the prices at which the services and goods are able to remain competitive in the international market.”
IBPAP, SEIPI and CONWEP said the same issue has also given rise to “confusion” on the part of the various industries engaged as suppliers of goods and services to the export sectors, such as the providers of healthcare, power, raw materials and other integral services.
Failure to address the VAT issue, they said, may have a “crippling consequence” on the parts localization initiatives of exporters and particularly affect their local suppliers who they said will be more at risk should they lose their market.
Further, in several meetings among representatives of the three export industry groups with government officials, IBPAP, CONWEP and SEIPI said there is a “strong agreement” that this is the biggest issue they are all currently facing.
“The inability to address this serious and pressing matter by the end of March will have detrimental effects to these three sectors particularly in sustaining their growth potential,” the joint statement read.
The groups noted that investment promotion agencies, such as the Philippine Economic Zone Authority, Board of Investments, Clark Development Corp., Authority of the Freeport Area of Bataan (AFAB), among others, are “deemed to be in the best position to determine and endorse list of goods and services eligible for VAT zero-rating purchased by exporters from local suppliers.”
The contribution of the three groups to the country’s goods and services export earnings reached $83 billion, or 69 percent of the total last year.
In terms of employment, they said there are currently about 2.5 million direct and 6.75 million indirect employees who depend on the capacity of their industries to “survive and compete.”
Image credits: Nonie Reyes