Bill granting VAT refund for non-resident visitors approved in Senate on final reading

THE SENATE on Monday approved on third and final reading a bill that seeks to establish a value-added tax (VAT) refund mechanism for nonresident visitors.

Twenty senators voted in favor of Senate Bill No. 2415, allowing eligible tourists to avail of VAT refunds for local purchases of goods worth at least P3,000. The House of Representatives approved a counterpart bill on third and final reading in March 2022.

Senate Minority Leader Aquilino Martin Pimentel III voted against the bill, saying that the Philippines was better off improving the tourist experience and tax administration.

“We have already lost billions in revenue due to these inefficiencies, compounded by ghost receipts, fraud, and an exemption-plagued tax system,” he told the Senate floor after his vote.

“There are far more important matters pending before this august body that deserve our attention and prioritization.”

Citing a 2018 World Bank study, he said the Philippines has lost about P539 billion in potential revenue due to VAT leakages and exemptions.

Enrico P. Villanueva, a senior lecturer at the University of the Philippines Los Baños Economics Department, said the system could be used to promote the Philippines as a premier shopping destination in Southeast Asia, but added that the government should partner with the private sector to boost tourist transportation and infrastructure.

“It is really more of a bonus rather than a primary factor in enticing tourists,” he said in an X message. “There are more important factors that the Tourism department should look into to enhance the value proposition of the country as a destination.”

“By allowing foreign visitors to claim VAT refunds on goods they purchase in our country, we create an environment that not only attracts more tourists but also encourages them to spend more on our products, which will eventually be taken out of the country,” Senator Sherwin T. Gatchalian, who sponsored the measure, told the Senate floor following its approval. — John Victor D. Ordoñez