THE DEPARTMENT of Finance (DoF) has sought the assistance of South Korea in implementing a value-added tax (VAT) refund system for visitors, as well as for environmental management support for the resort island of Siargao in Surigao del Norte.
Finance Secretary Carlos G. Dominguez III said that he expects the value-added tax (VAT) refund system for tourists to be in place in the next two years, and sought to fast-track South Korean official development assistance (ODA) funding for an electronic invoicing system.
“We don’t have the system at the moment but we are certainly going to do it. And it should be in place sometime in two years,” Mr. Dominguez said in a panel discussion during the Philippine Hotel Owners Association Inc.’s (PHOAI) general membership meeting on Tuesday in Makati City, when asked whether the government will establish a VAT refund system amid the high volume of inbound tourists.
“Definitely there’s a possibility for us to outsource the system, but our problem at the moment is we don’t have an e-invoicing system, which we are currently working on. We have gotten a grant from the Korean government to study an e-invoicing system, and our plan is to put this in place by 2020,” he added.
Mr. Dominguez said that the South Korean VAT refund system for tourists was “very efficient,” and “very robust.”
Mr. Dominguez also said that the Philippines asked South Korea for support in environmental and sanitation programs for Siargao.
“We also wrote them for assistance to Siargao. I spoke to the finance minister who is also the deputy prime minister there and I asked him specifically to provide us assistance for the Siargao area. Knowing what happened to Boracay, we don’t want this to happen again,” said Mr. Dominguez.
“We had a real bad experience in Boracay. We want to make sure that the practices of to be introduced in Siargao will not lead us down to Boracay path so we’ll push the Koreans to hurry up. We chose South Korea because they are the best,” he added.
In the same event, Mr. Dominguez also said that the government will oppose moves to renew tax perks enjoyed by businesses in tourism enterprise zones.
In the implementing rules and regulations of the Tourism Act of 2009, fiscal incentives of firms operating inside tourism enterprise zones (TEZs) will lapse in 2019, which include income tax holidays, preferential income tax rates, VAT exemptions, and deductions, among others.
A member from the PHOAI asked Mr. Dominguez during the panel discussion whether the government will extend the perk, with Mr. Dominguez replying: “When we came to office that law was passed but never implemented by the last administration. One of the first things I did was implement it. And it will have to run its course. So it should be ending this year… that’s the current law. It’s going to end this year.”
Asked whether the tourism-related firms can no longer avail of tax perks from the Tax Reform for Attracting Better and High-quality Opportunities (TRABAHO) bill, Mr. Dominguez said: “Well I guess so because we are not the ones who made that law it’s the legislature. And as far as I know there’s no interest in the legislature to continue that law.”
The TRABAHO bill, which hurdled final reading in the House but is pending at committee level in the Senate, seeks to rationalize the fiscal incentives regime.
Mr. Dominguez also said the rise in world oil prices was due to a decision by US President Donald J. Trump to isolate Iran, and defended the first tax package, known as the Tax Reform for Acceleration and Inclusion (TRAIN) law — that lowered personal income taxes, eased VAT exemptions, and raised or introduced new excise taxes.
“The excise tax of P2.50 imposed on fuel products is a small increment of pump prices. This tax is not responsible for the spiral in fuel prices, Donald Trump is,” Mr. Dominguez said, noting that the US pullout from a nuclear deal with Iran effectively reimposed economic sanctions on that country.
Mr. Dominguez said that the TRAIN law only accounted for about 0.4 to 0.7 percentage points of inflation, which averaged 5% in the first nine months of the year — breaching the central bank’s 2-4% target.
“The global market, over which we have no control, is responsible for this. At any rate, considering the social and environmental impact of fossil fuel consumption, the excise tax is completely justified. Compared to excise taxes imposed on the same products elsewhere, the one imposed by the new tax reform law is negligible,” he added. — Elijah Joseph C. Tubayan