In yesterday’s Senate Ways and Means Committee hearing, Senator Win Gatchalian said the main goal of a VAT refund mechanism is to attract more tourists.
Conceding that the national revenue will be affected by giving tax incentives to non-resident tourists, Gatchalian said the country stands to gain more from increased tourism foot traffic.
Earlier, the budget department said the country will lose P4 billion if the VAT exemption on “shopping” non-resident tourists will be implemented.
Gatchalian said he was surprised that in the Association of Southeast Asian Nations region, we are the only country without a VAT refund mechanism.
He said this will also compensate the additional shopping and spending of tourists. The hearing tackled Gatchalian’s proposed bill which provides that P3,000 should be the minimum required shopping spending to qualify in the VAT refund.
The Department of Tourism and the Philippine Retailers Association were amenable to this recommendation. The tourism department noted this would encourage non-resident tourists to spend more and prolong their stay in the country. It pointed out that “shopping tourism” is a big thing nowadays.
At present, shopping is the second or third spending of tourists who come to the Philippines.
The VAT refund is a big thing in order for the country to attract tourists to see the Philippines just like before the pre-Covid pandemic whose number reached 8.2-million.
Among ASEAN countries, we are the only one not implementing VAT refund on non-residents tourist
Our top competitors in tourism like China, Japan, South Korea, Thailand, Singapore, Indonesia and Malaysia give VAT refund for tourists who go shoppidaw magkaroon ng pag-aaral dito ang DOT.
Studies by the Global Blue whichoperates the VAT refund system in other countries showed thatEuropean Union refunded in 2019 2.8-billion euros in VAT but the additional economic contribution reached 5.2-billion.
In 2025, the VAT refund in EU will be about 3.8-billion while 6-billion will be the economic contribution.
So they were looking at the net positive impact in giving VAT refund.