Electronics companies are poised to shift to imported raw materials due to the additional cost caused by the imposition of the 12-percent value-added tax (VAT) on purchases from domestic constructive exporters
Dan Lachica, president of the Semiconductor and Electronics Industries of the Philippines Inc. (SEIPI) in a press conference said this means P10 billion to P28 billion worth of purchases and would cause the displacement of some 10,000 to 50,000 workers.
SEIPI and more than two dozen groups yesterday made a unified call for the suspension of Revenue Regulation (RR) No. 9-2021, which implements the imposition of the VAT on the transactions of exporters that were previously VAT zero-rated.
These include raw materials and packaging, outsourced services (e.g. processing, manufacturing or repacking of goods to be exported), by contractors and subcontractors, among others.
Lachica in a letter to Trade Secretary Ramon Lopez in a letter dated July 9, 2021 sought assistance on a July 17, 2021 request to Bureau of Internal Revenue (BIR) Commissioner Caesar Dulay to reconsider reviewing the implementation of RR.
Lachica said even with the additional cost in logistics and cycle time in importing these materials would still be cheaper than pay 12 percent VAT.
The multinational electronics firms would likely to source from China, Vietnam, Thailand and Malaysia.
“Despite the risks of lost export revenues and increased unemployment, the BIR has so far been unresponsive regarding our request for reconsideration,” Lachica said in his letter
The additional costs on local purchases, SEIPI said, will have to be passed on to the export- oriented manufacturing companies and should this be even refundable, the process takes years to consummate.
Lachica said companies will also need to allocate more resources and manpower to handle the long and arduous refund process should this be even possible.
Lachica said clarifications are needed since RR No. 9-2021 contradicts Section 108 (B) (3) of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, that the sale of goods and/or services that can be justified as directly and exclusively used in the registered activity should remain VAT zero-rated.
In the same press conference, Rey Untal, president of the Information Technology Business Process Association of the Philippines, called for the repeal of the RR saying the VAT imposition would be hurtful, harmful and would negatively impact perception of the ease of doing business in the Philippines.
Francisco Zaldarriaga, president of the Philippine Ecozones Association for his part considers the RR a “very lethal blow” to the economy.” (Irma Isip)
