In view of the continuing adverse impact of the COVID-19 pandemic, the Department of Finance has deferred Revenue Regulation No. 9-2021 (RR 9 – 2021) that imposed the value-added tax (VAT) on exporters’ purchases from local suppliers and other indirect exports.
This is a timely shot-in-the-arm, considering that Philippine exports fell by 16.3 percent year on year in 2020.
Exporters raised alarm signals over the BIR ruling that took effect in late June – considering that latest reports from the Philippine Statistics Authority (PSA) showed an upswing in export performance until May 2021. On a year-to-date basis, export earnings from January to May 2021 amounted to $29.35 billion, a 21.4 percent increase from the export value earned from January to May 2020.
Exports of manufactured goods took a lion’s share of total exports in May 2021 amounting to $4.96 billion or 84.2 percent, followed by mineral products, $460.83 million (7.8 percent); and total agro-based products, $348.05 million (5.9 percent). Electronic products are still the country’s top export accounting for nearly 60 percent of the total in May 2021 with total earnings of $3.43 billion.
These figures validate the exporters’ concern that RR 9-2021 would set back or slow down the growth and recovery trajectory.
Anticipating the DOF’s new tack, Representative Jose Clemente Salceda of the House Committee on Ways and Means said a week ago that the DOF will focus on implementing the provision in the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act permitting exporters to enjoy zero VAT on local purchases of goods and services directly used in the registered project or activity.
Port Call Asia, a news and data provider for cargo transport and logistics professionals, reflected the cautionary stance of export industry stakeholders who uniformly espoused the repeal of RR 9-2021.
Semiconductor and Electronics Industry of the Philippines (SEIPI) estimated that RR 9-2021 would likely discourage foreign investors from participating in Philippine companies as sourcing raw materials and packaging supplies from foreign sources would be cheaper than sourcing from domestic suppliers. Hence, this could cost the industry some P28 billion in foregone revenues and up to 50,000 in potential job losses.
The Philippine Economic Zone Authority (PEZA) pointed out the RR 09-2021 contradicts the provisions of the CREATE Act on the VAT exemption of registered enterprises and cited applicable Supreme Court rulings that were adverse to the BIR on related issues. The Pilipino Banana Growers and Exporters Association affirmed this position. The Confederation of Wearable Exports of the Philippines was concerned that this would marginalize local producers and suppliers of the manufacturers of thread, buttons, zippers and cartons.
The preponderance of serious objections from concerned stakeholders makes Juan de la Cruz wonder why the disputed revenue regulations were issued in the first place – and why this was done at a time when the country’s export sector had recovered its stride. Especially in troubled times, the people expect well-reasoned policy making from the government that would enable them to weather turbulence and reap the fruits of enterprise.