Manila, Philippines - Foreign businessmen are concerned over a recent Supreme Court (SC) ruling denying tax refund claims of foreign firms in the country, warning that the move weakens efforts to encourage more investments to be made here.

In a statement, Henry Schumacher, European Chamber of Commerce of the Philippines (ECCP) vice president for external affairs, said the action taken by the SC to deny tax refund claims is undermining the efforts of the government and the Joint Foreign Chambers (JFC) to bring more investments into the country.

The SC ruling involves San Roque Power Corp. (SRPC), jointly owned by Marubeni Corp. and Kansai Power International Corp., which poured in $1.20 billion worth of investments to build a hydroelectric power plant with a capacity of 411 megawatts in Pangasinan.

“The decision of the SC concerns us, as there are more than 100 other companies that are in the same position as them.

In other countries, refunds are given to companies after several weeks.

Here in the Philippines, holding them for more than 10 years has been the trend,” Schumacher said.

In February, the SC en banc ruled SRPC is not eligible to claim the value-added tax refund amounting to P483.80 million based on technicalities.

The High Court said the firm lost its right for refund as it filed the claims with the Court of Tax Appeals (CTA) before the Bureau of Internal Revenue (BIR) gave its decision on the tax refund.

Under Section 112 of the 1997 National Internal Revenue Code, the BIR Commissioner is given 120 days from the date of submission of documents by the claimant to decide if it will grant a refund or issue the tax credit certificate for creditable input taxes.

The claimant could file an appeal with the CTA within 30 days upon receipt of unfavorable ruling from the BIR.

“As a business community, we are worried as technicalities have overruled the justified refund of the VAT and because the ruling was made retroactive. This is unfair. If the Supreme Court feels that new rules have to be established then, we appeal they do it prospectively,” Schumacher said.

He said the JFC is set to discuss their concerns on the SC ruling on Friday and bring the issues to the attention of the economic cluster of the Cabinet and the National Competitiveness Council.

Aside from the ECCP, the JFC counts the American, Australia-New Zealand, Canadian, Japanese and Korean foreign chambers along with the Philippine Association of Multinational Companies Regional Headquarters as its core members.

Schumacher said that as the government wants to attract more investments, it is important to recognize that foreign companies which have already placed funds in the country serve as ambassadors for other companies planning to establish operations here.

“The business environment remains super bureaucratic, business unfriendly, and investment incentives are often not delivered,” he said.

“Emphasis is always put on convincing new investors to invest here. Unfortunately, it is often forgotten that you have to treat ‘old’ investors well too,” he added.

Source: The Philippine Star;  Business; 22 April 2013