Department of Finance (DOF) Secretary Ralph G. Recto is confident about the country’s economic outlook for 2025, driven by the recent passage of two major laws to boost tourism, local spending, and food security.
Both Republic Act (RA) No. 12079, or the Value-Added Tax (VAT) Refund Mechanism for Non-Resident Tourists Act, and RA No. 12078, or the Amendments to the Agricultural Tariffication Act, were signed into law on Monday, Dec. 9.
According to the VAT refund law, which is also a priority reform, “tourists shall be eligible for VAT refunds on locally purchased goods.”
According to DOF, this positions the Philippines alongside other countries with a standard VAT system, which is intended to encourage foreign tourists to spend more.
“It is high time that the Philippines catches up with countries around the world that have long implemented a standard VAT refund system. This strategic initiative aims to encourage foreign tourists to spend more in our country, stimulating our domestic economy,” Recto said.
“With increased tourism spending, we will have higher revenues to collect and we can create more jobs, raise incomes, and accelerate economic growth,” he added.
Under RA 12079, foreign tourists must personally purchase goods from accredited stores and take them out of the country within 60 days of purchase.
Goods purchased per transaction must be worth at least P3,000, with the threshold adjustable based on the consumer price index.
Refunds can be issued electronically or in cash and will be sourced from the Special Account in the General Fund under Section 106 of the Code.
The law also requires the DOF to partner with reputable international VAT refund operators to establish and manage a VAT refund system aligned with global best practices.
Recto, as the finance chief, shall issue the implementing rules and regulations (IRR) within 90 days, following consultations with key government agencies.
Easy recovery from losses
The DOF noted that the potential revenue losses from the law are expected to be easily recovered through the increased tourism spending it encourages, which will benefit the economy.
According to DOF data, savings from the refund redirected to tourism spending could increase economic output by P2.8 billion to P4.0 billion annually.
Meanwhile, the amended law on tariffication could strengthen government measures “to stabilize rice prices during periods of volatility and to prevent manipulative pricing and hoarding.”
As per Recto, the Rice Tariffication Law refinements are crucial for ensuring affordable rice supply and strengthening the agriculture sector.
Additionally, the law enhances the Department of Agriculture’s (DA) regulatory role, enabling it to track rice storage facilities and monitor rice trade activities with other agencies.
It allows the DA to declare a rice food security emergency during supply shortages or price surges and allocates P30 billion annually to the Rice Competitiveness Enhancement Fund (RCEF) until 2031 to boost rice farmers' competitiveness and income.