In a recent Philippine Development Forum, an annual dialogue between the government and official donors, one of the key recommendations of the Forum’s working group on economic and fiscal reforms is the removal of the cap on input VAT.
The working group is composed of multilateral lending agencies led by the World Bank and the International Monetary Fund, Department of Finance, Department of Trade and Industry, National Economic and Development Authority, members of Congress, academe and the private sector.
CAMPI reiterated its position that the input VAT cap hinders the growth of industries particularly those with slim profit margins like the automotive industry.
This onerous provision of the new VAT Law interferes in the manner by which the local industries are conducting their business operation.
The cap is a misdirected policy which unwittingly punishes legitimate businesses who comply with their tax obligations.
Although the automotive industry fully appreciates the recognition of the problems by the Bureau of Internal Revenue (BIR) in its effort to address the industry’s concerns on the input cap, CAMPI believes that these concerns can be fully addressed by the repeal of the 70 percent cap on input VAT.
The automotive industry is still hopeful that the executive and legislative branches of government would immediately work together to remove from the new VAT Law the 70 percent input cap in order to ease the burden of local businesses.
CAMPI stated that the repeal would have a positive effect on the industry’s competitiveness, viability, and growth.
CAMPI urged the government to rectify and correct the problem immediately.