Foreign chambers bat to retain zero VAT for PEZA locators

MANILA — The Joint Foreign Chambers of the Philippines (JFC) is batting to maintain the status quo of exempting locators in Philippine Economic Zone Authority (PEZA) from the 12-percent value added tax (VAT).

JFC said in a statement Monday that should long-committed investors be placed under a VAT refund scheme, this would harm attracting investments in the country since it will be an additional cost of doing business and it is also seen to create red tape.

“In order to maintain and to expand foreign investments in PEZA zones, the incentive structure must be attractive in comparison to what competing countries offer in fiscal incentives, labor incentives, electricity and logistics pricing, number of paid holidays, and other costs,” JFC stated.

The business group noted that some investors are delaying its investment decisions in the Philippines or opt to invest in other countries due to uncertainties that may be brought by the Tax Reform for Acceleration and Inclusion (TRAIN) bill.

It mentioned that foreign investors would prefer a zero-rated VAT scheme rather than seeking refund because the government has poor record in making these refunds.

During the plenary discussion on TRAIN bill in the Senate, Senator Juan Edgardo “Sonny” Angara revealed that the government has current pending payment of around PHP30 billion as refund.

“Foreign investors would prefer not to have any refund arrangement for zero-rated firms, as this would be consistent with President Duterte’s policy of making doing business in the Philippines easier and support an improvement in country’s rating in the Global Competitive Index of the World Economic Forum,” the JFC said.

Moreover, the JFC stressed that retaining the zero VAT provisions for PEZA locators in the Senate Bill No. 1592 or the TRAIN bill is crucial to both investors and the investment promotion agency.

PEZA houses over 3,500 investors in more than 350 economic zones nationwide.

Big investors in PEZA are from the electronics sector and information technology (IT) parks developer, which support the IT and business process outsourcing (ITBPO) industry in the country.

Both electronics and ITBPO industries are growth driver of the country’s export revenues.

JFC is composed of American Chamber of Commerce of the Philippines, Australia New Zealand Chamber of Commerce of the Philippines, Canadian Chamber of Commerce of the Philippines, European Chamber of Commerce of the Philippines, Japanese Chamber of Commerce of the Philippines, Korean Chamber of Commerce of the Philippines, Information Technology and Business Process Association of the Philippines, and Semiconductor and Electronics Industries of the Philippines Foundation, Inc.