AS always, the Marcos administration has demonstrated its penchant for tweaking fiscal policies with the aim of boosting government revenues and attaining economic stability. While the objective is valid — commendable even — sometimes the projections of President Bongbong’s economic managers do not add up; they oftentimes fail to achieve the desired result, such as when the President lowered tariffs on rice to 15 percent from 35 percent last July hoping that the prices of rice would decrease. They did not.
Now the government is again experimenting on another policy said to boost tourism by making the Philippines a shopping hub in this part of Southeast Asia. President Ferdinand Marcos Jr. recently signed a new law, Republic Act (RA) 12079 or the Value-Added Tax (VAT) Refund Mechanism for Non-Resident Tourists Act.
The new measure introduces Section 112-A in the National Internal Revenue Code (NIRC) of the Philippines, which states that tourists shall be eligible for VAT refunds on locally purchased goods.
‘Our take is that while this new policy might help, we still have a long way to go in luring tourists to do their shopping here.’
The law states that goods should be purchased by foreign tourists in duly accredited stores in person and should be taken out of the country by the tourist within 60 days from the date of purchase.
The value of goods purchased per transaction should be equivalent to at least P3,000 but the Secretary of Finance may adjust this threshold upon recommendation of the Commissioner of the Bureau of Internal Revenue (BIR), taking into consideration the consumer price index. Refunds may be made electronically or in cash and shall be drawn out from the Special Account in the General Fund as provided under Section 106 of the Code.
This privilege is nothing new in the tourist industry, as many countries with a much more developed shopping tourism sector than ours have been implementing this for years now. The idea is to ramp up tourism and push the sale of locally manufactured goods.
“It is high time that the Philippines catches up with countries around the world that have long implemented a standard VAT refund system. This strategic initiative aims to encourage foreign tourists to spend more in our country, stimulating our domestic economy,” Finance Secretary Ralph Recto said.
Tourism Secretary Christina Frasco gladly supported Recto’s observation. Both Cabinet members expressed belief that with increased tourism spending, we will have higher revenues to collect and we can create more jobs, raise incomes, and accelerate economic growth.
Special Assistant to the President for Investment and Economic Affairs Secretary Frederick Go, meanwhile, said the VAT refund law will help enhance the country’s appeal to international visitors.
Our take is that while this new policy might help, we still have a long way to go in luring tourists to do their shopping here. We have to improve the quality and quantity of our products. We have to provide good hotel accommodations, and fast and reliable transportation facilities, including in ports, airports and roads.
It is also important to monitor and assess after a year or so of implementation if the VAT refund program really works.
