Senator Imee Marcos on Friday, July 23, appealed to the Bureau of Internal Revenue (BIR) to exclude manufacturers of personal protective equipment (PPE) and other medical supplies from the imposition of value-added tax (VAT) on local inputs.
Likening it to the COVID-19's mutations, Marcos called this a "tax variant", which, she said "threatens to cancel gains some exporters have already made toward economic recovery and will push them back into a critical state."
The BIR issued last June 12 the Revenue Regulation 9-2021, which revokes the 12-percent VAT exemption on the sale of raw materials, packaging supplies and other services to export-oriented manufacturers.
The chairperson of the Senate Committee on Economic Affairs raised concern over the policy's impact to garments exporters, which have been coping with the coronavirus pandemic’s onslaught by producing PPEs, surgical masks and other medical goods, instead.
She said their profits are supposedly averaging less than five percent, but this "may be wiped out by the new BIR regulation imposing the 12-percent VAT."
Finance Secretary Carlos Dominguez III already said his department will review the BIR regulation, following calls by business groups to repeal it. Pending the review, Dominguez said the imposition of VAT on exporter's local inputs is deferred.
Meanwhile, Marcos pushed for the passage of her Senate Bill No. 1708 or the proposed “Healthcare Manufacturing and Pandemic Protection Act", which proposes tax exemptions for local makers of critical healthcare products during a health emergency,
She said the bill will not only attract foreign investors but also preserve local jobs.
“During health emergencies, local sales of critical healthcare goods produced by exporters will be treated as export sales. So, these will be exempted from VAT, duties and fees, with export incentives kept intact,” Marcos explained.
The Marcos bill also seeks to mandate the government to procure healthcare supplies from local manufacturers first, as long as their bid prices do not exceed a foreign bidder’s lowest bid price by 25 percent.
“The Department of Health could have avoided the controversy over allegedly overpriced PPEs amounting to P1.8 billion, had it procured from local manufacturers who can produce the same goods for a much cheaper price,” she reiterated.