THE DEPARTMENT of Finance (DoF) said it is possible to cut value-added tax (VAT) rates if the reduction is accompanied by the removal of all VAT exemptions.
Although lowerign VAT rates is not in among the DoF’s plans, Finance Secretary Carlos G. Dominguez III said that he is open to a cut, as long as exemptions are also trimmed.
“There might be a possibility to reduce the rate by eliminating all exemptions.That is one possibility, but we haven’t calculated that yet,” he added.
“All of that can be subject to discussion.”
He said legislators “have to be careful about reducing the VAT rate,” since the government is not as efficient in collecting taxes compared to other countries.
“The VAT rate here is 12% and we only collect 4.7% as VAT tax as a percentage of GDP (gross domestic product). In Thailand the rate is only 4.7% and they collect 4.7%,” Mr. Dominguez said.
“If we can bring up our collection rate say to 7% by eliminating exemptions, of course we are open to reducing the rate of the VAT,” he added.
“Unfortunately in the past, VAT has been used as a fiscal incentive which is really wrong. There is no other country in the world which has so many exemptions,” he said.
Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Act broadens the VAT base and plug leakages by removing some exemptions.
The law also reduces the processing time for VAT refunds.
According to Finance Undersecretary Antonette C. Tionko, claims for VAT credits reached 1,580 in 2017.
“The total, for BIR (Bureau of Internal Revenue), is P35 billion as of Dec. 31 2017. But these were all filed before the TRAIN. So they should be processed according to the tax code,” she said.
The National Internal Revenue Code states that tax credits will be processed within 120 days. TRAIN mandates a 90-day processing time.
“We will follow that. But it has significantly gone down,” added Ms. Tionko. — Elijah Joseph C. Tubayan