May 3rd, 2023
House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) urged the Bureau of Internal Revenue (BIR) to issue the necessary rules and regulations to implement resolutions to VAT-related concerns of registered business enterprises immediately, as “these matters have already been exhaustively discussed both on their end in the Executive and on our end in Congress.”
“I urge Commissioner Romeo Lumagui to issue the rules and regulations on the clearer and smaller negative list on VAT zero-rating for registered exporters , the rules on simplified VAT refunds, and the application of the transitory period for the 5% GIE for domestic enterprises without delay,” Salceda said.
“Last Tuesday, we reiterated this in the Committee on Ways and Means, during our regular hearing. Secretary Diokno already issued the directive this week to the BIR. At least on the zero-rating. So, we expect at least that one by next week. No more issues left to study or discuss there,” Salceda added.
Transition period for GIE in lieu of all taxes was part of ‘gentleman’s agreement’
Salceda also reiterated that the intent of Congress on the transitory period for the recipients of the 5% on gross income earned (GIE) incentive in lieu of all taxes should be respected and reflected in policy.
“The transitory period, in particular, should be respected. It should have been respected from the start. Look, the 5% GIE was only an incentive insofar as it was in lieu of all national and local taxes. The PEZA Law, or RA 7916, very clearly nested that tax rate under the heading ‘Exemption from National and Local Taxes.’ So, let’s respect that,” Salceda added.
“That was the deal we made with affected industries. We will sunset your incentives for a more performance-based regime, but everybody under the current regime gets a break for 10 years. That was the gentleman’s agreement.”
“We lose respectability as an investment destination if we suddenly quibble about these things after we made that agreement with stakeholders.”
“I also reiterate that CREATE was amendatory of the 5% GIE incentive, as is clear in the amending clause. But it did not repeal that incentive. It only gave a deadline,” Salceda added.
“Anyway, I intend to write Secretary Diokno again this week to reiterate the intent and interpretation of Congress of the law it wrote and enacted. I want to avoid the scenario of having the courts decide this matter. Because then, both Executive and Legislative lose all manner of latitude on this issue. It’s a tax issue. We should get it sorted among the two branches,” Salceda said.
VAT refund system “still too complex”
Salceda adds that the VAT refund system “leaves much to be desired” nearly five years after the enactment of the Tax Reform for Acceleration and Inclusion (TRAIN) Law, which promised “The successful establishment and implementation of an enhanced VAT refund system” under Section 31 of the law.
“The BIR cites the stringent procedures of the Commission on Audit as a reason it is careful about the VAT refund system. So, I want to revisit how COA audits the BIR for VAT refunds, and propose that the key performance indicator be the speed at which it delivers the refund, rather than whether it gives it at all. This is not government money, remember. This is taxpayer money that the government is withholding.”
“The refund is the service. When the BIR delays the service, that should be what is subject to COA scrutiny, not the release of the refund,” Salceda added.