Japanese contractors collect P810M worth of tax refunds

Japanese contractors are collecting on some P810 million worth of tax refunds that have not been settled by the government.

Aside from about P75 million in tax refunds still owed to Japanese contractors under grant-assisted projects, the government has to settle another P736 million owed under projects funded by loans from the Japanese government.

The Department of Finance (DOF) disclosed yesterday that the government’s tax refunds to Japanese contractors still amount to a total of P810 million.

Finance Secretary Margarito B. Teves told reporters yesterday that the government has paid over 82 percent of the tax refunds for grant-assisted projects but the claims under loan-funded projects are still being validated by the DOF.

Reporting after the Tokyo roadshow last week, Teves said that after reconciling the claims of Japanese contractors participating in Japanese grant-assisted projects, the remaining balance had been pared down from P119 million to only P74.5 million.

According to Teves, the government has not resumed paying off claims under loan-assisted projects and only refunds for grant-assisted projects have been whittled down since Tokyo suspended all grant aids to the country because of accumulating unpaid refunds.

Teves said the government intends to settle the entire P74.5 million this year but a separate reconciliation would have to be conducted to validate all claims under loan-funded projects.

Under various grant and loan agreements, Japanese contractors participating in grant and loan-assisted projects in the country are exempted from the value-added tax (VAT).

In 2005, Teves said the government paid a total of P300 million, equivalent to about 72 percent of total refund. This year’s payments, he said, would finally settle the entire amount.

Teves said the government made another pitch for Tokyo to resume grant aid to the Philippines although he admitted it was "a bit trickier" making a commitment on when the government could settle the rest of the arrears.

"We need to validate the claims of Japanese contractors first, it’s a normal process built into the system" Teves said. "Once we determine what the final amount is, then we can decide on a specific time table for the settlement."

However, Teves said there was still no commitment from the Japanese government that it would resume grant aid to the Philippines after it was suspended in 2004 due to the accumulation of unpaid VAT refunds.

The suspension affected mostly local health and infrastructure projects that used to enjoy grant assistance from the Japanese government.

The suspension came after the Arroyo administration hit serious budget deficit problems and eventually failed to keep up with its tax refund payments to Japanese contractors who are all exempted from the VAT under various agreements with the Japanese government.

Data from the National Economic and Development Authority (NEDA) showed that as of 2004, the government has refunded a total of P932.293 million for projects under the yen loan package and P252.61 million for grant-type of projects.