The European Chamber of Commerce of the Philippines (ECCP) has thrown full support behind Japanese investors’ VAT refund claims against the Philippine government.

In a statement released over the weekend, the ECCP expressed hope that the government – Department of Finance (DOF), Bureau of Internal Revenue (BIR), the Court of Tax Appeals (CTA) and the Supreme Court (SC) make a concerted effort to deliver to trusting local and foreign businesses valid refunds of their excess input VAT credits and of the advanced VAT payments made by investors at the import of capital equipment for infrastructure projects.

The Japanese embassy in Manila and the Japanese Chamber of Commerce of the Philippines have aired concerns over the tax refund issue for quite sometime. The Japanese even raised the tax refund issue at the ongoing review of the Philippines-Japan Economic Partnership Agreement.

“It is more than unfortunate that the above organizations are making it more and more difficult to get VAT refunds by complicating the process of granting promised and entitled VAT refunds, in an obvious effort not to deliver what government promised. The trust in government is at stake,” signed the statement signed by ECCP vice-president for external affairs Henry Schumacher.

Schumacher cited as unfortunate example the treatment on the San Roque Power Corporation (SRPC) case. The government requested them to invest in a power plant and offered duty- and tax-free importation of capital equipment as an incentive.

SRPC invested and the plant is running for more than 10 years. Did they get the advanced VAT of P482 million back? No.

While SRPC won at the CTA, the BIR pushed the case up to the Supreme Court – as usual. The good news was the SC First Division upheld the CTA and SRPC but the bad news was the SC en banc on reconsideration, reversed the First Division.

“Investors are confused and disappointed. How do they explain to their management at home country and their shareholders that after more than 10 years after the import and the investment that your justified refund was denied,” the ECCP said.

To make things worse, the ECCP said that BIR issued Revenue Memorandum Circular (RMC) No. 54-2014, in effect making it more difficult for tax payers to exercise their right to refund with due process and procedure. And because of the retroactive implementation of the RMC, it prejudices the rights of taxpayers with pending VAT claims.

Already in the SRPC case, the business community argued that the SC should not rule retroactively but be fair and set new rules from now onwards.

“If the state expects its taxpayers to observe fairness and honesty in paying their taxes, it must hold itself against the same standard. The DOF and the BIR does not do that. It is therefore not surprising that the Philippines is not getting the amount of Foreign Direct Investment it needs to build much needed infrastructure, create manufacturing plants and develop agriculture for inclusive growth.

“Investors see the lack of transparency, predictability and consistency in the government’s behavior. Consequently, it is high time for government to see the big picture rather than relishing in the short-term success of depriving investors of the VAT refunds,” the statement concluded.

Source: Manila Bulletin, 11 August 2014