A ranking official of the European Chamber of Commerce of the Philippines (ECCP) on Saturday warned the government it might lose its foreign investors because of its abrupt policy changes.

Henry Schumacher, ECCP vice president for external affairs, told a media forum that the foreign business communities in the country may lose their confidence in the government because of its penchant for changing investment rules in the middle of the game.

He cited the looming change in the rule on tax refunds, which would result from a Supreme Court (SC) decision issued in February. He said if such a change was implemented, it should apply only prospectively, not retroactively.

The foreign business communities here in the Philippines are very worried about the ruling on the refund of the value-added tax (VAT)…. There should be no changing of horses in midstream, he said.

In that ruling, the High Court denied the tax-refund claim of the San Roque Power Corp. (SRPC), which poured in $1.2 billion worth of investments to build a hydroelectric power plant in Pangasinan 10 years ago.

The SC ruled that SRPC was not eligible to claim the VAT refund amounting to P483.80 million because of technicalities.

“This action made by the SC is [a] discouragement [for foreign investors] to bring more investments into the country,” he said.

The Court also said SRPC 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.  The SC ruling is under appeal.

Under Section 112 of the 1997 National Internal Revenue Code, the internal revenue commissioner is given 120 days from the date of submission of documents by the claimant to decide if the bureau would 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 an unfavorable ruling from the BIR.

The ECCP official also said foreign companies that have already poured investments into the country also acted as brokers to attract more companies planning to establish business in the Philippines.

“Of course before they [incoming investors] put an investment here, they would ask us about our [current investors] status,” he said.

Schumacher said the ECCP was still hoping that the case of the tax refund would be resolved immediately. He said more than 100 other companies in the Joint Foreign Chambers of the Philippines (JFCP) have the same position as ECCP.

“Earlier we wrote a letter to [Finance] Secretary [Cesar] Purisima asking his help to address this problem but as of now we heard nothing from him,” he said. “It is not yet too late to avert a disaster.”

The JFCP includes American Chamber of Commerce of the Philippines Inc., Australian-New Zealand Chamber of Commerce of the Philippines Inc., Canadian Chamber of Commerce of the Philippines Inc., Japanese Chamber Commerce of the Philippines Inc., Korean Chamber Commerce of the Philippines Inc. and Philippine Association of Multinational Companies.

Source: Business Mirror; Front Page; 2 June 2013