The Philippines is considering implementing a VAT-refund program for tourists similar to what is offered in many other Asian countries. Proponents believe waiving the tax would encourage outbound travelers to do more shopping in the Philippines.
“The Philippines is probably one of the few (ASEAN) countries left that don’t implement a VAT refund scheme for tourists,” Philippine Retail Association Chairman Paul A. Santos told local media. “Shopping is an integral part of the tourist experience. You go visit a country like Hong Kong or Singapore, apart from seeing the sites [and] eating, the next thing that you do is shop.”
There is momentum for the Philippines to implement a VAT-refund program for tourists. The House of Representatives endorsed for Senate approval of a bill that would establish a VAT refund mechanism last year. It has also been endorsed by President Ferdinand R. Marcos Jr.
The current proposal would allow foreign tourists to claim a VAT refund on purchases of PHP3,000 or more from accredited retailers. The measure would also let visitors claim a VAT refund through service providers on goods purchased.
“You want tourists to spend more of their dollars or euros in Philippine shops. We look at the VAT and duty-free exemption extended to these visitors as well,” Santos added.
Congress is expected to take action on the bill when it reconvenes in July. If approved, the Philippines VAT-refund program for tourists could generate an additional PHP10 to PHP40 billion in sales during the first year.
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Interesting Analysis
VAT refund schemes for tourists are fairly common across Asia. Their success, or lack thereof, depends on how well retailers and the government market them to visitors. For example, South Korea has done an excellent job of implementing its program and it is very easy to get your tax return at most major airports.
Approving the VAT and duty-free exemption bill is simply the first step for the Philippines. The country then must successfully implement it and ensure people know about the program from the moment they land in the country until it becomes time to leave.
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