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Leading exporters call for settlement to VAT zero-rating

The government was urged on Tuesday to issue the resolution on value-added tax (VAT) zero-rating for exporters’ purchases by the country’s three main exporting sectors: semiconductors and electronics, information technology and business process management (ITBPM), and apparel and wearables.

The Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI), the Confederation Wearables Exporters of the Philippines (Conwep), and the IT and Business Process Association of the Philippines (IBPAP) jointly called for the release of the document by the end of the month.

By the end of the month, which also marks the conclusion of the first taxable quarter, a solution has been promised. As exporters, these three businesses have requested VAT zero-rating on their purchases in accordance with current regional laws and generally acknowledged standards, allowing the sectors to maintain their competitiveness, they argued.

The resolution is being completed by the Fiscal Incentive Review Board (FIRB).

The industry associations stated failure to resolve the VAT zero-rating problem by end of this month “will have detrimental effects to these three sectors particularly in sustaining their growth potential”.

“The sectors understand that most government agencies involved in resolving the issue believe that there is a clear basis for all purchases of exporters to be without the 12 percent VAT, given that this is not only allowed by the rules but is, more importantly, critical in ensuring that the prices at which the offered services and goods are able to remain competitive in the international market,” they added.

IBPAP, SEIPI, and Conwep also emphasized the need to resolve the VAT issue for indirect exporters, such as those who assist exporters with healthcare, power, raw materials, and other essential goods and services.

“It is feared that failure to address the VAT issue may have a crippling consequence on the parts localization initiatives of exporters and especially affect their local suppliers who will be more at risk should they lose their market,” the associations stated.

It also stated that organizations that promote investments, such as the Philippine Economic Zone Authority, Board of Investments, Clark Development Corporation, and Authority of the Freeport Area of Bataan, are in the best position to endorse a list of goods and services that exporters can purchase from local suppliers at a VAT-free rate.

According to IBPAP, SEIPI, and Conwep, their industries will collectively provide USD 89 billion, or 69 percent of the nation’s entire export revenues from the previous year, and 20% of the nation’s overall GDP in 2022 to the country’s exports of goods and services.

Along with directly employing 2.5 million Filipinos, the semiconductor and electronics, ITBPM, apparel, and wearables industries have also generated 6.75 million indirect jobs.

“Having clear and consistent government laws and regulations is crucial for them to be able to increase their GDP contribution and realise their potential to employ millions of Filipinos. These are crucial for guaranteeing ease of doing business and cost competitiveness, which are always important factors for both current and potential investors when deciding where to invest, according to the industry associations.

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