The Philippine Economic Zone Authority said about P24 billion worth of local purchases maybe lost to imports if the government will lift the exemption of small enterprises from value added tax.
Peza director-general Charito Plaza said suppliers of locally-manufactured raw materials for economic zone locators would face difficult challenges if subjected to a 12-percent VAT, a proposed measure under the tax reform program.
“If this happens, locators may consider bringing in imported materials using the tax and duty-free incentive given by Peza. This will be a big loss to our local suppliers,” Plaza said over the weekend.
She said Peza, in behalf of local suppliers, was asking the government to keep the incentives regime in Peza economic zones at status quo.
Congress already passed the tax reform bill that slaps a 12-percent VAT on local purchases of export-oriented companies.
Plaza said while the agency would like to support the tax reform scheme, it would continue to lobby for the exemption of local purchases from VAT.
“We will not oppose [the program] but we will appeal for the VAT exemption. We are doing our best to promote, market the Philippines as a prime investments hub, but we have the keep what we are giving to locators. Why do we have to change the rules when there is no problem in the game?” she said.
She said local companies/suppliers were worried that the government could give them a hard time recouping the VAT within the prescribed 90 days as stated in the bill.
All local suppliers are micro, small and medium enterprises that survive competition by rolling their investment and revenues on a monthly basis, she said.
Plaza said the government should focus more on having an efficient tax collection system instead of imposing taxes on small industries that contribute to economic development.
“We are all aware that there are many tax evaders in the country. This is what the government should prioritize. And then, whatever incentives we give especially to foreign investments should be retained,” she said.