THE House Committee on Ways and Means on Monday approved the substitute bill for the VAT refund for outbound tourists.
Albay Rep. Joey Sarte Salceda, the panel chairman, said this proposal was already approved in principle by the President when it was brought up by the Private Sector Advisory Council.
“I expect between P10 billion and 40 billion in increased sales from local suppliers [for the first year of its implementation]. That has the same nature, consequence, and character as exports. And we don’t even have to compete with other exporters. The audience is already captured,” Salceda said.
“Save for India and Cambodia, we are the last major Asian country without an operative VAT refund system for tourists. That hurts our competitiveness for tourists with, say, Vietnam and Thailand, which now receive more tourists than we do,” said the lawmaker.
Salceda principally authored the measure along with Senior Vice Chairperson Mikaella Suansing, who chaired the technical working group drafting amendments to the original draft.
The proposal added a new Section to the National Internal Revenue Code, which allows outbound tourists to refund goods to be taken out of the country, with a per transaction value of at least P3,000. These goods must be purchased from accredited suppliers.
“A VAT refund, as global studies show, increases the propensity to spend. Generally, for every P1 refunded, the tourist spends an additional P1.5,” said Salceda
“That will create an additional 20,000 to 80,000 jobs, and will also improve our gross international reserves,” Salceda added.
The measure also allows the VAT refund system to be administered by a service provider, as is the practice in most jurisdictions.
Under the bill, a tourist refers to a foreign passport holder who is a non-resident individual not engaged in trade or business in the Philippines.
Boost domestic tourism
Salceda also urged the Department of Tourism, represented in the hearings by Undersecretary Shereen Gail Pamintuan, to consider amendments to the Tourism Act or Republic Act No. 9593, to allow the Department of Tourism to grant promotional incentives for domestic tourists, particularly in the meetings, incentives, conferences, and exhibitions sector.
“I understand that it is the MICES sector that is the bulk tourism sector of the country. So, when you incentivize the MICES sector, you incentivize tourists wholesale,” Salceda added.
“I am requesting the DOT to look into a more expansive definition of incentives for the domestic tourism sector,” Salceda urged.
Earlier, Salceda said the Philippines remains one of the few major Asia-Pacific tourist destinations without a working VAT tourist refund mechanism.
“Only India and Cambodia are the other countries in the top 15 tourist destinations in Asia-Pacific with this gap in procedure. This reduces the country’s competitiveness among its peers and neighboring countries,” Salceda said.
The Philippines recorded 2.65 million (2.02 million foreign tourists and 628,445 Filipinos overseas) visitors from February to December 2022.
This figure is higher than the 2021 tourist arrivals of 163,879 but still significantly lower than the prepandemic level of 8.26 million.
This year, the Department of Tourism (DOT) targets to welcome 4.8 million visitors, which could generate P2.58 trillion in revenue.