Philstar.com
December 9, 2024 | 10:45am
MANILA, Philippines — President Ferdinand Marcos Jr. on Monday signed a measure enacting a value-added tax (VAT) refund system for non-resident tourists.
The measure aims to encourage tourists from outside the country to spend more on local goods to drive up spending.
“We are introducing the VAT refund program for non-resident tourists. Designed not only to stimulate more spending, but to promote the Philippines as a premier global shopping destination,” Marcos said at a ceremonial signing at Malacañan Palace.
Foreign tourists’ purchases should reach a minimum of P3,000 should they want to avail of the VAT refund, according to the new law.
Tourists would be able to claim a VAT refund on goods they personally bought from accredited stories. The goods must also be taken out of the Philippines within 60 days of their stay.
The Philippines has a VAT of 12%, which is the highest rate in Southeast Asia.
“The economic impact of this measure is projected to be substantial, estimating an almost 30% increase in tourist spending. This surge will benefit both large-scale industries and micro, small, and medium enterprises—an important pillar of our local economy,” Marcos said.
‘A monumental shift’
In a statement, Department of Tourism Secretary Christina Frasco said that inbound tourism for shopping reached P137.4 billion in 2023.
“The passage of the VAT Refund Law for tourists marks a monumental shift in the way we enhance the Philippine tourism experience. This not only elevates the country’s competitiveness as a premier destination in Asia but also adds significant value to the overall visitor journey,” Tourism Secretary Christina Frasco said in a statement.
The departments of finance, trade, tourism and economic planning as well as the Bureau of Internal Revenue are mandated to draft and release the new law’s implementing rules and guidelines within 900 days of the law’s effectiveness.
Possible losses
In the Senate, Minority Leader Aquilino Pimentel III contested the bill, arguing that not all of its projected gains are set in stone.
“It is projected that this mechanism could lead to an average increase of 148,000 tourist arrivals from 2024 to 2028. It is even argued that an increase in tourist arrivals will result in increased spending by the tourists. However, Mr. President, these are merely projections and will come at a cost,” Pimentel said while interpellating the measure in September.
Pimentel said the government could lose up to P4 billion in VAT from foreigners in the next five years. The money could have built 1,600 new classrooms.
Frasco, meanwhile, responded to Pimentel and argued that that tourism contributed P3.36 trillion to the economy in 2023. She said this more than made up for any foregone revenues.
“It’s not just a comparison of what is foregone to what is obtained but also, it should be taken in the light of tourism employment, in it that more tourist spending will mean more people employed in the tourism industry with businesses thriving because it becomes a very attractive tourist shopping destination,” Frasco said in an ambush interview at the ceremonial signing.
Frasco added that the tourism sector employs about 6.21 million Filipinos in the country as of 2023, which further increased to 16 million as of the first quarter of 2024.
“The pros far outweigh the cons,” she said.
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