CPBRD Discussion Papercpbrd.congress.gov.ph/images/PDF Attachments... · 1 Title IV, NIRC, as amended by RAs 7716, 8241, 8424, 9238, 9337 and 9361. 2 Tax rate was increased from 10%

Value-added Tax in The PhiliPPines:ReVenue PeRfoRmance and

The PRoPosed RefoRm

By JuBels cRuz sanTos

Issue No. 1 - January 2017

CPBRD Discussion PaperCongressional PoliCy and Budget researCh dePartment

house of rePresentatives

House of RepresentativesBatasang Pambansa, Quezon City, Metro Manila

Tel. Nos. 931-60-32 or 931-93-92Website: http://cpbrd.congress.gov.ph

CPBRD

Value-added Tax in The PhiliPPines:ReVenue PeRfoRmance and

The PRoPosed RefoRm

The views and opinions in this report do not necessarily reflect the perspectives of the House of Representatives as an institution or its individual Members.

The tax policy reform program is part of the priority agenda of the Duterte administration, in line

with the commitment to promote positive change to the Filipino people. The tax policy reform

program consists of four packages. The Department of Finance (DOF) submitted to Congress

the first package of the proposed tax reform, known as the “Tax Reform for Acceleration and

Inclusion” (TRAIN) that seeks to lower and restructure personal income taxes while broadening

the value-added tax (VAT) base and adjusting excise taxes imposed on petroleum products and

automobiles. Expanding the VAT base by removing several exemptions and limiting the exempt

list to raw food and other necessities (e.g. education, health) is one of the offsetting tax measures

being proposed to cover the loss from the personal income tax cut. This VAT reform proposal

will be the subject of this paper.

i. VaT in The PhiliPPines

Features And Objectives

VAT1 is levied on the sale, barter, exchange or lease of goods or properties, and services, in

the course of trade or business, and on importation of goods (Sec. 105, Title IV, NIRC). The

current VAT rate is 12%2. The threshold amount of annual gross sales or receipts should exceed

PhP1,919,5003 for VAT-registered persons.

VAT is a form of an indirect, consumption tax. As an indirect tax, VAT may be shifted or passed

on to the buyer, transferee or lessee of the goods, properties or services. As a multi-stage tax, VAT

is collected in various stages of production and distribution chains. Like in most countries, the

Philippine VAT is levied on the basis of the destination principle (goods and services are taxed on

the basis of where they are consumed, rather than where they are produced). Exports are zero-

Value-added Tax in The PhiliPPines:ReVenue PeRfoRmance and The PRoPosed RefoRm*

By JuBels Cruz santos

* This paper benefitted from the inputs and overall guidance of Executive Director Roentgen F. Bronce and Director General Romulo E.M. Miral, Jr., Ph.D. The author would also like to thank OIC-Director Pamela Diaz-Manalo and Director Dina de Jesus-Pasagui for their inputs and support. The research assistance of Susan C. Palaganas is also acknowledged.1 Title IV, NIRC, as amended by RAs 7716, 8241, 8424, 9238, 9337 and 9361.2 Tax rate was increased from 10% to 12% with the passage of RA No 9337 (R-VAT). R-VAT was implemented on November 1, 2005 while the VAT increase took effect on February 1, 2006 via BIR Revenue Memorandum Circular (RMC) No. 7-2006.3 RR 16-2011 increased the amount of the threshold from PhP1,500,000 under RA 9337 to PhP1,919,500 using 2010 Consumer Price Index (CPI) effective January 1, 2012. The amount shall be adjusted to its present value using the CPI, as published by the NSO, every three (3) years thereafter and the adjustment shall be published through revenue regulations to be issued not later than March 31 of each year.

2 Value-added Tax in The PhiliPPines: ReVenue PeRfoRmance and The PRoPosed RefoRm

rated (0%), which means that exporters are allowed to receive credit for the VAT paid on their

inputs (input tax on purchases), even as they pay zero output VAT (output tax on sales). Under

the VAT system, tax credit or “invoice” method is allowed (firms are entitled to subtract input

VAT from their output VAT; however, credits are allowed only if supported by invoices from their

suppliers.) Input tax credit is a critical feature of VAT that ensures that the tax is not imposed on

investment. VAT has a self-policing feature as it provides a trail of invoices that helps improve tax

compliance and enforcement (Manasan, 2003).

One of the objectives of VAT is to simplify the tax administration process. The imposition of

a single-rate VAT made tax administration simpler and easier. Compared to other indirect taxes,

VAT has more revenue potential due to its broader tax base. Moreover, with tax credit or “invoice”

method, VAT removes the cascading effect of multiple taxation. Further, export sales are given

zero-rating, keeping Philippine exports competitive in the foreign market. Agriculture, education,

and health services, as well as sale of small enterprises, are also exempted from VAT in keeping

with the equity principle of taxation (de Jesus-Pasagui, 2001).

However, as discussed by Reside and Burns (2016), there is no single tax instrument that achieves

all the goals of a good tax system. A broad-based consumption tax such as VAT, with limited

exemptions and a single rate, can be an efficient and simple tax. Nevertheless, because of lack of

progressivity (lower percentage of total income/budget comprised of tax for wealthier individuals

than for those with lower incomes), VAT does not satisfy the vertical equity4 criterion, although

it satisfies the horizontal equity5 principle with its comprehensive tax base. To address this,

exemptions on goods and services that are commonly used by poor households were provided.

Indeed, a good tax system needs to balance trade-offs to achieve its goals and principles through

a mix of tax instruments.

Legislative History

VAT was first introduced in the Philippines on January 1, 1988 through Executive Order No. 273

that replaced sales, turnover tax and other taxes. The rate was initially at 10%, and imposed on

limited number of goods and services. On May 5, 1994, the VAT coverage was expanded, with the

4 Vertical equity requires that individuals with greater ability to pay tax/with higher income should have a greater tax burden.5 Horizontal equity requires that individuals with the same ability to pay tax/income should have the same tax burden.

3Congressional PoliCy and Budget researCh dePartment

enactment of RA 7716 (EVAT). However, the EVAT law was not implemented until 1996 due to

legality issues. On December 20, 1996, RA 8241 or the Improved VAT (IVAT) expanded the list

of VAT-exempt transactions. RA 9337 or the Reformed VAT (R-VAT) was passed by Congress on

May 24, 2005 but was only implemented on November 1, 2005 after hurdling legal issues before

the Supreme Court. Under this law, exemptions of certain goods and services were lifted. On

February 1, 2006, the VAT rate was increased from 10% to 12%, as stipulated in RA 9337(CPBRD

Facts in Figures, December 2015).

ii. TRansacTions suBJecT To VaT (12%), zeRo-RaTed, and exemPT6

Transactions subject to the 12% VAT include: 1) Sale of Goods or Properties; 2) Importation of

Goods; and 3) Sale of Services and Use or Lease of Properties (Secs. 106, 107, and 108, Title IV,

NIRC).

Zero-rated transactions are allowed to receive credit for the VAT paid on their inputs (input tax

on purchases), while they have zero (0%) output VAT (output tax on sales). Transactions subject

to 0% VAT include:

1. Sale of Goods – (a) export sales; (b) foreign currency denominated sales; and (c) sales to

persons or entities whose exemption under special laws or international agreements to

which the Philippines is a signatory (Sec. 106, Title IV, NIRC); and

2. Sale of Services – (a) processing, manufacturing or repacking goods for other persons doing

business outside the Philippines, which goods are subsequently exported; (b)

services other than processing, manufacturing or repacking rendered to a person engaged

in business conducted outside the Philippines or to a non-resident person not engaged in

business who is outside the Philippines when the services are performed; (c) services

rendered to persons or entities whose exemption under special laws or international

agreements to which the Philippines is a signatory; (d) services rendered to persons

engaged in international shipping or air transport operations, including leases of property;

(e) services performed by subcontractors and /or contractors in processing, converting,

or manufacturing goods for an enterprise whose export sales exceed 70% of total annual

6 Title IV, NIRC on Value -Added Tax


productions; (f) transport of passengers and cargo by domestic air or sea carriers from the

Philippines to a foreign country; and (g) sale of power or fuel generated through renewable

sources of energy such as biomass, solar, wind, hydropower, geothermal, ocean energy and

other sources (Sec. 108, Title IV, NIRC).

Exempt transactions, on the other hand, do not have claims on both input and output VAT. The

following are the VAT-exempt transactions:

1. Sale or importation of agricultural and marine food products in their original state,

livestock and poultry of a kind; breeding stock and genetic materials and fertilizers, seeds,

seedlings and fingerlings; fish, prawn, livestock and poultry feeds, including ingredients,

whether locally produced or imported, used in the manufacture of finished feeds;

2. Importation of (a) personal and household effects belonging to the residents returning

from abroad and non-resident citizens coming to resettle in the Philippines; (b) professional

instruments and implements, wearing apparel, domestic animals, and personal household

effects and (c) fuel, goods and supplies by persons engaged in international shipping or air

transport operations;

3. Services rendered by persons subject to percentage tax; agricultural contract growers and

milling; medical, dental, hospital and veterinary services; educational services rendered by

private educational institutions; individuals pursuant to an employer-employee relationship;

regional or area headquarters established by multinational corporations and banks, non-

bank financial intermediaries;

4. Sales by agricultural cooperatives and non-agricultural, non-electric and non-credit

cooperatives duly registered with the Cooperative Development Authority (CDA) and

persons who are not VAT-registered on their exports sales;

5. Transactions which are exempt under international agreements to which the Philippines is

a signatory or under special laws, except those granted under PD No. 529;

6. Gross receipts from lending activities by credit or multi-purpose cooperatives;

7. Lease of a residential unit with monthly rental not exceeding PhP12,800;

8. Sale of real properties not primarily held for sale to customers or held for lease in the


ordinary course of trade or business or real properties utilized for low-cost and socialized

housing;

9. Sale, importation, printing or publication of books and any newspaper, magazine, review

or bulletin;

10. Transport of passengers by international carriers doing business in the Philippines;

11. Sale, importation or lease of passenger or cargo vessels and aircraft including engine,

equipment and spare parts thereof for domestic or international transport operations; and

12. Sale or lease of goods or properties or the performance of services other than the

transactions mentioned in the preceding paragraphs, the gross annual sales and/or receipts

do not exceed the amount of PhP1,919,500 (Sec. 109, Title IV, NIRC).

There are also VAT exemptions covered by special laws. These laws include:

• RA No. 10073, Girl Scouts of the Philippines Charter of 2009;

• RA No. 10072, Philippine Red Cross Act of 2009;

• RA No. 9520, Philippine Cooperative Code of 2008;

• RA No. 9367, Bio-fuels Act of 2006;

• RA No. 9295, The Domestic Shipping Development Act of 2004;

• RA No. 7278, Boy Scouts of the Philippines;

• PD 1869 or PAGCOR Charter;

• RA No. 9994, Expanded Senior Citizens Act of 2010; and

• RA No. 10754, Amendments to Magna Carta for Persons with Disability;

(NTRC Legislation on VAT Exempt Transactions under Special Laws, March 29, 2016).

iii. VaT ReVenue PeRfoRmance

VAT has been a major contributor to government revenues. Among internal revenue taxes, it ranks

second to income tax as to amount of contribution to our coffers. As shown in Table 1, since

the full implementation of RA 9337 in 2006, the share of VAT to total tax revenue significantly

increased from 22%-23% level to a range of 31%-32% (Aure, 2011).


TaBle 1 shaRe of VaT ReVenues To ToTal Tax ReVenues: 2004-2015

(in Billion Pesos)

Based on the National Tax Research Center (NTRC) Tax Research Journal for November-

December 2011, the VAT revenue performance under RA 9337 has significantly improved by

almost two-thirds in 2006. The sharp increase in that year’s VAT collection by both the Bureau

of Internal Revenue (BIR) and the Bureau of Customs (BOC), with growth rates of 60.4% and

72.7% respectively (as shown in Table 2), can be attributed to the first full-year implementation of

Sources of Basic Data: BIR, BOC and BTr

Sources of Basic Data: BIR and BOC

Year Total VAT Revenues Total Tax Revenues % Share to Total

2004 139.1 598.0 23.3

2005 156.7 705.6 22.2

2006 259.8 859.9 30.2

2007 274.0 932.9 29.4

2008 296.7 1,049.2 28.3

2009 302.2 981.6 30.8

2010 330.8 1,093.6 30.2

2011 383.3 1,202.1 31.9

2012 450.4 1,361.1 33.1

2013 490.0 1,535.7 31.9

2014 557.9 1,720.1 32.4

2015 570.2 1,815.5 31.4

TaBle 2VaT ReVenues and GRowTh RaTes: 2004-2015

(in Billion Pesos)

Year

VAT Revenues Growth Rate (%)

BIR BOC Total BIR BOC Total

2004 80.2 58.9 139.1

2005 87.9 68.8 156.7 9.5 16.9 12.6

2006 140.9 118.9 259.8 60.4 72.7 65.8

2007 145.0 129.0 274.0 2.9 8.5 5.5

2008 140.3 156.4 296.7 (3.2) 21.2 8.3

2009 168.3 133.9 302.2 19.9 (14.4) 1.8

2010 173.3 157.5 330.8 3.0 17.6 9.5

2011 183.1 200.2 383.3 5.7 27.1 15.9

2012 229.6 220.8 450.4 25.4 10.3 17.5

2013 250.1 239.8 490.0 9.0 8.6 8.8

2014 278.8 279.1 557.9 11.5 16.4 13.9

2015 295.5 274.7 570.2 6.0 -1.6 2.2


RA 9337 when the increase from 10% to 12% of the VAT rate took effect. VAT revenues more

than tripled from PhP156.7 billion in 2005 (pre-RA 9337 regime) to PhP570.2 billion in 2015. BIR

and BOC data also show an increasing trend in VAT collection in the succeeding years.

As shown in Table 2, the BIR VAT revenue showed an increase from PhP80.2 billion in 2004 to

PhP295.5 billion in 2015. Collection gains can be attributed to the administrative reforms being

implemented by the BIR. However, in 2008, collection dropped by 3.2% from the previous year’s

collection. Such decline was traced by the BIR to the increased input tax claims by importers and

taxpayers with capital expenditures of more than PhP1 million in 2007, and other non-recurring

transactions such as privatization, audit/assessment, closures, etc., of about 8% of the total VAT

collected (BIR Annual Report 2008, Value-Added Tax, BIR Collection Performance, p.18).

The BOC VAT revenue more than quadrupled from PhP58.9 billion in 2004 to PhP274.7 billion

in 2015. It steadily grew from 2004-2015 except for the 14.4% drop in collection in 2009. The

decline was due to the reduction in the value of imports by 20.04% specifically the lower crude

oil imports and the stronger peso and lower tax payment by the government through the tax

expenditure fund (TEF) (BOC Annual Report, 2009, pp. 6, 8-9).

The improvement of BOC collections can be attributed not only to the various programs that

it has implemented, but also to the observation that collecting VAT on imports is easier than on

domestic transactions. There are also no input tax claims at the time of importations. Input tax

claims will only start when the imported item is used to produce an output subject to VAT (Aure,

2011).

Earmarked Funds

Under the R-VAT Law, half of the local government units’ (LGUs) share in the incremental VAT

(available to them after three years) is earmarked for social and economic services, particularly on:

a) public school buildings and furniture and in-service of public school teachers in the elementary

and secondary levels (15%); b) health insurance premiums of indigents (10%); c) environmental

conservation (15%); and construction of farm-to-market roads and irrigation facilities (10%)

(Villanueva, 2006).


iV. comPaRaTiVe VaT and VaT-like imPosiTions in The asean

Among the ten ASEAN member countries, six are imposing the VAT: Philippines, Cambodia,

Lao PDR, Thailand, Vietnam and Indonesia while three are imposing tax with VAT-like structure

namely the Goods and Services Tax (GST) of Singapore and Malaysia, and Commercial Tax (CT)

of Myanmar. Brunei has no VAT or equivalent consumption tax. Of the six countries imposing

the VAT, five have single rate: Philippines at 12%; Cambodia, Indonesia and Lao PDR with 10%;

and Thailand with the lowest rate at 7% (increased to 10% by September 30, 2016). In the case of

Indonesia, a special levy termed as Luxury Goods Sales Tax (LST) with rates ranging from 10%

to 75% is also imposed. On the other hand, Vietnam has two-tiered VAT rates, a standard rate of

10% and 5% for specific essential goods and services. Singapore collects a GST of 7%; Malaysia

collects GST of 6% effective April 1, 2015 (before Malaysia imposed 6% service tax and 5% and

10% sales tax); and Myanmar collects CT with rates ranging from 5% to 100% (Yasol, 2014).

Compared to other ASEAN countries, the Philippines has the highest VAT rate of 12%. However,

due to many VAT-exempt transactions in the Philippines and the problem of VAT gap/leakages,

the VAT collection-to-GDP ratio is not significantly higher than other countries with lower VAT

rates. Thailand for instance, with the lowest VAT rate of 7%, has a VAT-to-GDP ratio of 3.2%,

while the Philippines has a VAT-to-GDP ratio of 3.7% (See Table 3).

TaBle 3 VaT in The asean

Note: n.a. no data available; VAT - Value-Added Tax; GST - Goods and Services Tax; CT - Commercial Tax Sources: KMPG 2013, NTRC Tax Research Journal Vol. XXVI.3, 2014 IMF Gov’t. Finance Statistics 2011 & ADB Key Indicators 2014

1

Country Tax Type Rates VAT-to-

GDP Ratio (2010)

Brunei No VAT or consumption based tax system

Myanmar CT 5% to 100% n.a

Malaysia GST 6% 1.0

Singapore GST 7% 2.5

Cambodia VAT 10% 3.7

Lao PDR VAT 10% 3.3

Thailand VAT 7% 3.2

Vietnam VAT 10% n.a

Indonesia VAT 10% 3.4

Philippines VAT 12% 3.7


Looking at ASEAN Zero-Rated and VAT-Exempt Transactions

Based on a study by the NTRC, zero-rated transactions for exports of goods and certain types of

specific services are common to all ASEAN countries. This is to avoid double taxation. International

transport services by aircraft or ship are zero-rated in the Philippines, as well as in Thailand,

Vietnam and Singapore. The sale of power or fuel generated through renewable sources of energy

is subject to zero-rate in the Philippines. Thailand has also distinctively applied zero-rating on

transactions that other ASEAN countries do not apply, such as on supply of goods and services

to government agencies and local authority or state enterprises under overseas loan program or

assistance program. There is no information on zero-rated goods/services in Myanmar (Yasol,

2014). Refer to Annex A for the List of Zero-Rated Goods/Services/Transactions in ASEAN countries.

The Philippines has 60 lines of VAT-exemptions, based on the NIRC as well as under special

laws. Compared to ASEAN, our VAT system has the most exemptions, while Singapore’s GST

has the lowest with only seven exemptions. Thailand with the lowest VAT rate of 7% has 35 lines

of exemptions only. NTRC also surveyed the list of exempt transactions in ASEAN. Common to

most ASEAN countries are the sale and importation of agricultural and marine food products in

their original state. Just like the Philippines, importation of personal and household effects is also

listed as exempt from VAT in Cambodia, Lao PDR, and Thailand. In addition, Philippines, Lao

PDR, Thailand, Vietnam, Malaysia, Indonesia and Myanmar include sale, importation, printing

or publication of books in their list of VAT-exempt transactions. Transactions involving lease of

residential units not exceeding PhP12,800 monthly rentals are non-VATable in the Philippines.

Singapore and Thailand offer the same exemption to this transaction but there is no available

information as to the amount of exemption. Medical services are listed as exempt in the Philippines,

Lao PDR, Cambodia, Thailand, Vietnam and Indonesia (Yasol, 2014). Refer to Annex B for the VAT-

Exempt Transactions in the ASEAN.

V. VaT RefoRm

The VAT reform (under the Tax Reform Package 1) as proposed by the DOF seeks to broaden the

VAT base by limiting the exemptions to raw food and other necessities (e.g. education, health).

The reform does not include an increase in the VAT rate. DOF estimates a revenue gain of


PhP163.4 billion (high-end revenue impact by 2019) with the proposed VAT base expansion. Said

VAT reform is one of the offsetting measures being proposed to cover the projected revenue loss

amounting to PhP159 billion from the personal income tax reform. With the proposed reform,

some transactions which are currently zero-rated or VAT-exempt will be subject to the 12% VAT.

VAT reform proposals submitted by DOF to Congress in September 2016:

• Limiting the definition of export sales subject to 0% VAT to:

- direct exports;

- sales to international shipping and air transport operations provided, that the goods,

supplies, equipment and fuel shall be used for international shipping and air transport

operation; and

- sales of export products to another producer or export trader (however, it will only be

deemed as export sales when actually exported by the buyer-exporter as evidenced by

landing certificates or similar commercial documents).

• On the transactions which currently enjoy VAT zero-rating which will now be

subject to 12% VAT:

- Sale of raw materials or packaging materials to a nonresident buyer for delivery to a

resident local export-oriented enterprise;

- Sale of raw materials or packaging materials to export-oriented enterprise whose

export sales exceed 70% of total annual production;

- Sale of gold to the Bangko Sentral ng Pilipinas (BSP);

- Those considered export sales under EO 226;

- Services rendered to persons or entities whose exemption under special laws or

international agreements to which the Philippines is a signatory;

- Services rendered to persons engaged in international shipping or international air

transport operations, including leases of property; and

- Services performed by subcontractors and/or contractors in processing, converting,

of manufacturing goods for an enterprise whose export sales exceed 70% of total

annual production.

• On the current VAT-exempt transactions, the following were deleted:

- Importation of professional instruments and implements, wearing apparel, domestic

animals, and personal household effects belonging to persons coming to settle in the

Philippines;


- Sales by agricultural cooperatives;

- Gross receipts from lending activities by credit or multi-purpose cooperatives;

- Sales by non-agricultural, non- electric and non-credit cooperatives;

- Lease of residential units; and

- Importation of fuel, goods and supplies by persons engaged in international shipping

or air transport operations.

• On the other hand, the sale of power or fuel generated through renewable sources of

energy, which is currently zero-rated, is included in the VAT-exempt list.

Aside from the above proposed reforms on the limitation of VAT-exemptions and zero-rated

coverage, the crediting of input VAT against output VAT will be limited to the current

year. Under the proposed tax reform, if at the end of the first three taxable quarters, the input tax

exceeds the output tax, the excess shall be carried over to the succeeding quarter. However, any

excess input tax at the end of the last quarter of the year shall not be carried over to the succeeding

year, but such excess input tax may be refunded.

The proposed reform will also repeal certain provisions related to VAT exemptions under

special laws. These include the following:

1. The grant of 20% discount and exemption from the value-added tax on the sale of goods

and services from all establishments, for the exclusive use and enjoyment or availment of

senior citizens:

a) Purchases of medicines, including the purchase of influenza and pneumococcal

vaccines, and such other essential medical supplies, accessories and equipment to be

determined by the Department of Health (DOH);

b) Professional fees of attending physicians/s in all private hospitals, medical facilities,

outpatient clinics and home health care services;

c) Professional fees of licensed professional health providing home health care services

as endorsed by private hospitals or employed through home health care employment

agencies;

d) Medical and dental services, diagnostic and laboratory fees in all private hospitals,

medical facilities, outpatient clinics, and home health care services, in accordance with

the rules and regulations to be issued by the DOH, in coordination with the Philippine

Health Insurance Corporation (Philhealth);


e) Actual fare for land transportation travel in public utility buses (PUBs), public utility

jeepneys (PUJs), taxis, Asian utility vehicles (AUVs), shuttle services and public railways,

including Light Rail Transit (LRT), Mass Rail Transit (MRT), and Philippine National

Railways (PNR);

f) Actual transportation fare for domestic air transport services and sea shipping vessels

and the like, based on the actual fare and advanced booking;

g) Utilization of services in hotels and similar lodging establishments, restaurants and

recreation centers;

h) Admission fees charged by theaters, cinema houses and concert halls, circuses, leisure

and amusement; and

i) Funeral and burial services for the death of senior citizens.

(Section 4 of RA 9994 or the Expanded Senior Citizens Act of 2010);

2. The grant of 20% discount and exemption from the value-added tax on the sale of goods

and services for the exclusive use and enjoyment or availment of the PWD:

a) On the fees and charges relative to the utilization of all services in hotels, and similar

lodging establishments, restaurants and recreation centers;

b) On admission fees charged by theaters, cinema houses, concert halls, circuses, carnivals

and other similar places of culture, leisure and amusement;

c) On the purchase of medicines in all drugstores;

d) On medical and dental services including diagnostic and laboratory fees such as, but not

limited to, x-rays, computerized tomography scans and blood tests, and professional

fees of attending doctors in all government facilities;

e) On medical and dental services including diagnostic and laboratory fees, and

professional fees of attending doctors in all private hospitals and medical facilities;

f) On fare for domestic air and sea travel;

g) On actual fare for land transportation travel such as PUBs/PUJs, taxis, AUVs, shuttle

services and public railways, including LRT/MRT/PNR; and

h) On funeral and burial services for the death of the PWD: Provided that the beneficiary

or any person who shall shoulder the funeral and burial expenses of the deceased PWD

shall claim the discount upon presentation of the death certificate. Such expenses shall


cover the purchase of casket or, embalming, hospital morgue, transport of the body

to intended burial site in the place of origin, but shall exclude obituary publication and

the cost of the memorial lot.

(Section 32(a) of RA 7277, as amended by RA 10754 or the Magna Carta for Persons with

Disability);

3. Payment by National Grid Corporation of the concession fees due to PSALM under

concession agreement (Section 9 of RA 9511 or the National Grid Corporation of the Philippines

Act);

4. On transactions with non-members provided that cooperatives are duly registered with the

Authority (Article 61(2)(b) of RA 9520 or the Philippine Cooperative Code of 2008);

5. On the importation and local purchase of passenger and/or cargo vessels; life-saving

equipment; safety and rescue equipment and communication and navigational safety

equipment; steel plates and other metal plates including marine-grade aluminum plates used

for transport operations (Section 4(a) and (b) of RA 9295 or the Domestic Shipping Development

Act of 2004);

6. On all income derived from operations, including the use, lease or sale of real properties

and the provision of services; on importations and purchases for its exclusive use (Section

11(a) and (b) of RA 10073 or the Girl Scout of the Philippines Charter of 2009);

7. All importations of equipment, vehicles, automobiles, boats, ships, barges, aircraft and

such other gambling paraphernalia, including accessories or related facilities, for the sole

and exclusive use of the casinos (Section 13 (1) or Presidential Decree 1869 s. 1983); and

8. No discrimination in tax treatment of the Boy and Girl Scouts of the Philippines (Last

paragraph of Section 8 of RA 7278 or the Boy Scout of the Philippines).

The DOF’s tax reform proposal, particularly on the lifting of VAT exemptions, received different

reactions from stakeholders. The House Ways and Means Committee is currently in consultation

with the DOF and other stakeholders on the revisions of the proposal. As of this date, no bill has

been filed yet regarding the proposed tax reform package.


Vi. issues RelaTed To The PRoPosed VaT RefoRm

Government collects taxes in order to raise the needed revenues to support its expenditure

program. More than just revenue generation, there is a need to correct the tax system, making it

equitable, more efficient, simple to administer, and easy to comply. This is the primary objective

of the proposed tax policy reform program known as TRAIN (Tax Reform for Acceleration and

Inclusion).

As Reside and Burns (2016) discussed in their study, tax systems are usually judged against the

standard criteria of equity (or fairness), efficiency (or neutrality) and simplicity. Achieving horizontal

equity needs a comprehensive tax base. Uniformity in taxation also removes distortions in resource

allocation as tax systems have impact on investment decisions, thus, achieving the efficiency

principle. Efficient tax design attracts foreign investment and promotes economic growth. In the

case of VAT, the imposition of single rate also aims to simplify the tax administration process.

Tax flexibility is also important to stabilize the economy should there be economic fluctuations

when tax adjustment is required. For the tax system to be effective, it should be in line with the

said principles.

On the equity and efficiency side, it is said that for VAT to remain effective, it should be broad-

based with limited exemptions. NTRC also recommends for the government to avoid proposals

expanding the coverage of VAT-exempt transactions as these break the VAT chain which will have

a negative effect on the flow of potential revenue from the VAT. Too many exemptions in the VAT

system also lead to VAT leakages as audit trail is lost along the tax credit process (Aure, 2011).

Limiting exemptions would increase the coverage of VAT and hence, increase revenue, simplify

the tax administration process, and address the problem of VAT gap/leakages. The VAT gap was

also a subject of NTRC study in 2009, and it was noted that the VAT gap/leakage could be traced

within the system itself. NTRC estimated that the VAT gap or leakage in 2010-2012 ranged from

24% to 34%, which is equivalent to PhP144.3 billion (lowest) and PhP168.1 billion (highest) (See

Table 4 for VAT gap estimates, 2010-2012).

Too many exemptions in the current VAT system, coupled with excessive claims of tax credits

and under-declaration of sales and purchases (associated to the non-issuance of invoice/receipts;


fake invoices to increase refund claims) lead to VAT leakages. Since VAT is vulnerable to these

abuses, a comprehensive tax base counters tax avoidance (the fewer the gaps in the tax base, the

fewer opportunities for tax avoidance). To curb such abuses and eliminate leakages, the BIR has

implemented the Third Party Information (TPI) through data linkages with other government

agencies, and the Reconciliation of Listing for Enforcement (RELIEF) programs. However, these

programs depend highly on information reported by parties to the transaction. Industry profiling

and benchmarking are also suggested to establish industry benchmarks or the maximum input tax

credit which a taxpayer should be allowed to claim. This is necessary for tax monitoring, auditing

and validating individual VAT returns filed within a given industry sector and also to prevent

excessive claims of tax credit which negatively affects VAT collection (Obias, 2009).

TaBle 4VaT GaP esTimaTes, 2010-2012

(in Billion Pesos)

Source: NTRC

Particulars 2010 2011 2012

Taxable Sales 6,298.1 6,639.1 7,318.3

Estimated VAT Revenue 498.9 537.5 594.9

Actual VAT Collection 330.8 383.3 450.6

Value-Added Tax Gap 168.1 154.2 144.3

VAT Gap in percent 34% 29% 24%

As mentioned earlier, the Philippines has the highest VAT rate of 12% among ASEAN countries.

However, due to the problem of VAT gap/leakages, this negatively affects the potential revenues

from the VAT. Broadening the VAT base by limiting its exemptions will not only raise the needed

revenues to cover the loss from the proposed personal income tax cut, but will also address the

issues concerning tax administration.

There are other issues raised concerning the proposed reform, especially with regard to

implementation. On the tax credit system, Roguel (2016) claims that the proposed amendment

on limiting the crediting of input VAT against output VAT to the current year will put burden on

the taxpayer on filing for refund, which is a very long and tedious process. If this will be pursued,

government should ensure an effective and efficient refund process.


Another issue is on the limitation of definition of export sales wherein it will be considered as

export sales subject to zero percent only when exported by buyer-exporter. Will the seller be

required to issue a bond subject to liquidation upon proof of exportation? Or will the sale first be

subject to VAT with a refund claim upon actual exportation? If such amendments will be pursued,

BIR should be have an efficient and effective refund mechanism in place. Otherwise, if refund

process will not be improved, our ease of doing business rankings may further drop. In the World

Bank Group’s Doing Business 2016 report, Philippines ranked 103rd in 2015 among 189 economies;

while in the World Economic Forum’s Global Competitiveness Report 2016-2017, Philippines

ranked 57th out of 138 economies. Inefficient government bureaucracy and complicated taxation

are among the problematic factors in doing business in the country. Thus, there should be an

institutional reform in the BIR itself to improve tax administration (Roguel, 2016).

Another argument regarding the elimination of certain exemptions is on delivery of social

assistance, a dimension of equity. Firstly, what should be the criteria for eliminating exemptions

enjoyed by senior citizens, cooperatives, and PWDs? DOF says that it will only lift the exemptions

for non-essential items. Would the exemptions cover only medicines? How about transportation/

airfare and other exemption benefits currently enjoyed by these sectors? Second, would the VAT

exemptions of poor taxpayers be replaced by transfer system or targeted subsidies? As discussed

by Professor Reside in a forum,7 broadening the VAT base could be further facilitated if transfer

instruments, funded alternatively out of direct and more visible budgetary appropriations, are

targeted towards poor taxpayers to replace VAT tax expenditure. DSWD and other agencies

providing subsidies should implement such in coordination with DOF, and the latter should also

think of alternatives.

Lifting of exemptions may also affect price increases. For instance, rent of residential units may

increase, thus, increasing the burden of renting households. Those in the middle-income bracket

may also be affected by the measure.

With the removal of exemptions, consumers should also be vigilant to ensure that producers

do not take advantage of the effect of the broadened VAT coverage to justify the unreasonable

increases in the price of basic commodities (Villanueva, 2006).

7 Ayala-UPSE Economic Forum titled “Something lost and something gained: the Duterte Tax Reform Proposal” held on December 2, 2016 at the PCED, Auditorium, UPSE, Diliman, Quezon City


These are among the issues that need to be addressed should such reform measures be pursued.

Tax reform should not only aim to raise additional revenues for the government but also correct

the current tax system – its policies and administration. Other factors should also be considered so

as not to increase the burden of taxpayers from the low and middle-income brackets. It is hoped

that the DOF and policymakers would also look for alternative measures to replace VAT tax

expenditures, particularly for the sectors that are presently covered.


RefeRences:

Aure, Mark Lester L. (November-December 2011) “Revenue Performance of Republic Act (RA) No. 9337,

Otherwise Known As The Reformed Value-Added Tax (RVAT) Law, 2004-2010,” NTRC Tax Research

Journal, Volume XXIII.6.

de Jesus-Pasagui, Dina. (2001) “VAT in Review,” Policy Brief No. 1., Congressional Planning and Budget Office.

de Jesus-Pasagui, Dina. (September 2016) “Financing the FY 2017 Budget,” 2017 Budget Briefer No. 2016-03,

Congressional Policy and Budget Research Department.

Manasan, Rosario G. (2003) “Estimating Industry Benchmarks for the Value-Added Tax,” Philippine Journal of

Development, Number 55, Volume XXX, No. 1, First Semester.

Obias, Marcelino Jr. B. (2009) “Estimates of the Value Added Tax Gap,” NTRC Tax Research Journal Volume

XXII.5.

Reside, Renato Jr. E. and Burns, Lee (September 2016) “Comprehensive Tax Reform in the Philippines:

Principles, History and Recommendations,” UP School of Economics Discussion Paper No. 2016-10.

Roguel, Edward L. (2016) “Proposed tax reforms: for better or for worse?,” Business World Economy Let’s

Talk Tax, available at http://www.bworldonline.com/content.php?section=Economy&title=proposed-

tax-reforms-for-better-or-for-worse&id=134307 (accessed on December 12, 2016)

Yasol, Marry Jean V. (May-June 2014) “Comparative VAT and VAT-like Impositions of ASEAN Countries,”

NTRC Tax Research Journal Volume XXVI.3.

Villanueva, Eden C. (January 2006) “VAT and the expanded VAT Law,” Economic Issue of the Day, Volume VI

No.1, Philippine Institute for Development Studies.

DOF Proposal “Tax Reform for Acceleration and Inclusion” submitted to Congress in September 2016

_________ (December 2015) “Value-Added Tax” Facts in Figures, No. 43, Congressional Policy and Budget

Research Department, House of Representatives.

National Internal Revenue Code (NIRC) as amended

Ernst and Young (2016) Worldwide VAT, GST and Sales Tax Guide

KPMG International (November 2013) ASEAN Tax Guide

KPMG International (2015) Asia Pacific Indirect Tax Country Guide, Global Indirect Tax Services.

NTRC Legislation on VAT Exempt Transactions under Special Laws, March 29, 2016

19Congressional PoliCy and Budget researCh dePartmenta

nn

ex

a

lisT

of

ze

Ro

-Ra

Te

d G

oo

ds/

seRV

ice

s/T

Ra

nsa

cT

ion

s in

ase

an

co

un

TR

ies

1

Ph

ilipp

ines

(V

AT

) C

ambo

dia

(VA

T)

Indo

nesi

a (V

AT

) La

o PD

R

(VA

T)

Mal

aysi

a (G

ST)

Mya

nmar

(C

T)

Sing

apor

e (G

ST)

Tha

iland

(V

AT

) V

ietn

am

(VA

T)

Exp

ort s

ales,

inclu

ding

the

follo

win

g:

Sa

les o

f goo

ds

expo

rted

from

th

e Ph

ilipp

ines

to

a fo

reig

n co

untry

Sa

les o

f raw

m

ater

ials o

r pa

ckag

ing

mat

erial

s to

a no

n-re

siden

t bu

yer f

or

deliv

ery

to a

resid

ent

expo

rter f

or

man

ufac

turin

g,

proc

essin

g,

pack

ing

or

repa

ckin

g th

e bu

yer’s

goo

ds

in th

e Ph

ilipp

ines

Sa

les o

f raw

m

ater

ials o

r pa

ckag

ing

mat

erial

s su

pplie

d to

an

expo

rter w

ith

Exp

orte

d go

ods

and

serv

ices,

and

certa

in c

harg

es in

re

latio

n to

in

tern

atio

nal

trans

porta

tion

of

peop

le an

d go

ods.

This

zero

ratin

g is

also

appl

icabl

e fo

r an

y go

ods a

nd

serv

ices s

uppl

ied b

y su

ppor

ting

indu

strie

s Q

ualif

ied

Inve

stm

ent

Proj

ect/

cont

ract

ors

to p

artic

ular

exp

ort

indu

strie

s G

oods

exp

orte

d fr

om th

e K

ingd

om

of C

ambo

dia

and

serv

ices c

onsu

med

ou

tsid

e Ca

mbo

dia.

Exp

orts

of t

axab

le go

ods (

tang

ible

or

inta

ngib

le) a

nd

taxa

ble

serv

ices.

How

ever

, the

im

plem

entin

g re

gulat

ion

stat

es

that

exp

orts

of

serv

ices,

subj

ect t

o ze

ro-r

ated

VA

T,

are

limite

d to

the

follo

win

g ca

tego

ries:

Toll

man

ufac

turin

g se

rvice

s for

ov

erse

as

cust

omer

s th

at m

eet

certa

in

requ

irem

ents

(in

the

toll

man

ufac

turin

g pr

oces

s, a

cont

ract

or

man

ufac

ture

s go

ods u

sing

raw

mat

erial

s pr

ovid

ed b

y th

e pa

rty

orde

ring

the

good

s, an

d th

e

Goo

ds a

nd

serv

ices f

or

expo

rt

Exp

orts

of

good

s and

se

rvice

s; E

ssen

tial

food

stuf

fs

(e.g

. rice

, tab

le sa

lt, su

gar,

plain

flou

r, co

okin

g oi

l);

Ess

entia

l m

edici

nes;

Live

stoc

k su

pplie

s; Su

pply

of th

e fir

st 3

00 u

nits

of

elec

tricit

y pe

r mon

th to

do

mes

tic

user

s for

a

min

imum

pe

riod

of 2

8 da

ys p

er

billi

ng c

ycle;

Su

pply

of

treat

ed w

ater

to

dom

estic

us

ers;

No

zero

-rate

E

xpor

t of g

oods

fr

om S

inga

pore

; Pr

ovisi

on o

f in

tern

atio

nal

serv

ices;

Su

pply

of a

pr

escr

ibed

tool

or

mac

hine

use

d in

the

man

ufac

ture

of

good

s in

Sing

apor

e in

cludi

ng th

e de

velo

pmen

t of

prot

otyp

es o

f the

to

ol o

r mac

hine

, as

well

as a

ny se

rvice

s re

nder

ed d

irect

ly in

co

nnec

tion

with

the

tool

or m

achi

ne to

an

ove

rsea

s per

son;

G

oods

supp

lied

for

use

on b

oard

or

inst

allat

ion

on a

qu

alify

ing

ship

; G

oods

sold

or

rent

ed to

‘App

rove

d M

arin

e Cu

stom

ers’

for u

se o

r in

stall

atio

n on

a

com

mer

cial s

hip’

Exp

ort o

f goo

ds;

Brin

ging

do

mes

tic g

oods

in

to a

duty

free

zo

ne;

Prov

ision

of

serv

ices

perf

orm

ed in

Th

ailan

d bu

t us

ed o

utsid

e Th

ailan

d;

Prov

ision

of

serv

ices f

or th

e m

anuf

actu

re o

f go

ods w

ithin

a

duty

free

zon

e or

pr

ovisi

on o

f se

rvice

s with

in a

du

ty fr

ee z

one

for t

he

man

ufac

turin

g of

go

ods i

n Th

ailan

d fo

r ex

port;

cer

tain

pr

ovisi

on o

f in

tern

atio

nal

trans

port

serv

ices

inte

rnat

iona

l tra

nspo

rt se

rvice

s by

airc

raft

or

Exp

orte

d go

ods

and

serv

ices,

cons

truct

ion

and

inst

allat

ion

carr

ied o

ut

over

seas

or

with

in e

xpor

t pr

oces

sing

zone

s, as

well

as

aviat

ion,

mar

ine

and

inte

rnat

iona

l tra

nspo

rtatio

n se

rvice

s.

Exp

orte

d go

ods

and

serv

ices

inclu

de g

oods

an

d se

rvice

s so

ld to

ove

rsea

s or

gani

zatio

ns o

r in

divi

duals

and

co

nsum

ed

outs

ide

Viet

nam

, as w

ell

as g

oods

and

se

rvice

s su

pplie

d to

or

gani

zatio

ns o

r in

divi

duals

in

non-

tarif

f are

as.

20 Value-added Tax in The PhiliPPines: ReVenue PeRfoRmance and The PRoPosed RefoRm a

nn

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TR

ies

1

Ph

ilipp

ines

(V

AT

) C

ambo

dia

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T)

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nesi

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AT

) La

o PD

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(VA

T)

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aysi

a (G

ST)

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nmar

(C

T)

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apor

e (G

ST)

Tha

iland

(V

AT

) V

ietn

am

(VA

T)

expo

rt sa

les

exce

edin

g 70

%

of it

s ann

ual

prod

uctio

n

Sa

les o

f gol

d to

th

e Ph

ilipp

ines

Ce

ntra

l Ban

k (B

angk

o Se

ntra

l ng

Pili

pina

s, or

BS

P)

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ign-

curr

ency

de

nom

inat

ed sa

les;

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to ta

x-ex

empt

pe

rson

s or t

o en

tities

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er a

sp

ecial

law

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y in

tern

atio

nal

agre

emen

t; Se

rvice

s ren

dere

d to

pe

rson

s eng

aged

in

inte

rnat

iona

l sh

ippi

ng o

r air

trans

port

oper

atio

ns;

Serv

ices o

f co

ntra

ctor

s or

subc

ontra

ctor

s in

proc

essin

g or

m

anuf

actu

ring

m

anuf

actu

red

good

s are

de

liver

ed to

th

e or

derin

g pa

rty o

r ot

hers

ap

poin

ted

by

the

orde

ring

party

)

Repa

ratio

n an

d m

ainte

nanc

e

serv

ices

relat

ing

to

mov

able

good

s tha

t are

be

ing

used

ou

tsid

e th

e In

done

sia

Cust

oms A

rea

Co

nstru

ctio

n se

rvice

s, w

hich

inclu

de

cons

truct

ion

plan

ning

co

nsul

tatio

n se

rvice

s, co

nstru

ctio

n ex

ecut

ion

wor

k se

rvice

s an

d co

nstru

ctio

n su

perv

ising

co

nsul

tatio

n

In

tern

atio

nal

serv

ices

w

holly

for

inte

rnat

iona

l tra

vel.

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rnat

iona

l tra

nspo

rt fo

r goo

ds

and

pass

enge

rs, l

ease

or

hire

of t

rans

port,

se

rvice

s rela

ted

to

land/

build

ing/

go

ods l

ocat

ed

over

seas

, ser

vice

s re

lated

to g

oods

for

expo

rt an

d go

ods

mov

ing

outs

ide

Sing

apor

e, se

rvice

s su

pplie

d to

ove

rsea

s pe

rson

s, su

pplie

s re

lated

to sh

ips o

r air

craf

t, te

lecom

mun

icatio

ns

serv

ices,

trust

se

rvice

s, co

-loca

tion

serv

ices (

for

com

pute

r ser

ver

equi

pmen

t), se

rvice

s re

lated

to e

lectro

nic

syst

em (f

or im

port

and

expo

rt of

go

ods)

, adv

ertis

ing

serv

ices,

supp

lies

relat

ed to

air

and

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cont

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s, an

d se

rvice

s per

form

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oods

stor

ed in

a

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ess p

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oods

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d pr

ovisi

on o

f se

rvice

s to

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ent

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oriti

es u

nder

a

fore

ign

loan

or

assis

tanc

e

proj

ect;

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le of

goo

ds

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prov

ision

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serv

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etw

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nded

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areh

ouse

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ouse

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ty

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e an

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ort o

f goo

ds

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ch is

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er

Sec.8

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he

Thail

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nue

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orld

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rnal

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014

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ilipp

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T)

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nesi

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o PD

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rs

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oduc

tion

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of p

ower

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gene

rate

d th

roug

h re

new

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sour

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rgy

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as,

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ot

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mas

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nerg

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g te

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lls a

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rvice

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thes

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rvice

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e re

lated

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imm

ovab

le go

ods l

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ide

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an

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ars

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bodi

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AT

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apor

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ST)

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aysi

a (G

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T)

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icul

ture

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quac

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re;

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ts to

A

gric

ultu

re

N

on-

proc

esse

d ag

ricul

tura

l/

hand

icraf

t pr

oduc

ts;

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seed

s, br

eedi

ng

anim

als,

pest

icide

s, va

ccin

es,

orga

nic

and

chem

ical

ferti

lizer

s D

omes

tic

anim

als a

nd

tree

plan

tatio

ns

Agr

icultu

ral

prod

ucts

, aliv

e or

dea

d an

imals

, fe

rtiliz

ers,

fishm

eal a

nd

anim

al fe

ed

Prod

ucts

of

culti

vatio

n,

husb

andr

y, aq

uacu

lture

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nim

al br

eedi

ng st

ock

and

plan

t va

rietie

s Pr

oduc

ts fr

om

sea/

salt

wat

er

dom

estic

an

imals

/plan

ts

Live

stoc

k,

poul

try, f

ish

feed

, agr

icultu

ral

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s, pl

anta

tion,

fo

rest

ry

Basic

nec

essit

ies

need

ed b

y th

e po

pulac

e, i.e

. ric

e, co

rn, s

ago,

so

ybea

ns a

nd

salt.

Live

ani

mals

, fis

h, se

afoo

d an

d ce

rtain

es

sent

ial fo

od

item

s inc

ludi

ng

mea

t, m

ilk,

eggs

, ve

geta

bles

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uits

, bre

ad,

etc.;

Live

ani

mals

, fis

h, se

afoo

d an

d ce

rtain

es

sent

ial fo

od

item

s inc

ludi

ng

mea

t, m

ilk,

eggs

, ve

geta

bles

, fr

uits

, bre

ad,

etc.

Prim

ary

com

mod

ities

in

cludi

ng c

ocoa

Padd

y (u

nmill

ed

rice)

, rice

, spe

lt,

bran

, rou

gh b

ran,

pa

ddy

husk

; whe

at

grain

as w

ell a

s sm

ooth

and

roug

h flo

ur; m

aize

and

othe

r cer

eals;

po

wde

r maiz

e an

d ot

her p

owde

r ce

reals

; pul

ses,

chick

peas

and

pea

flo

ur; g

roun

d nu

ts, s

helle

d or

un

shell

ed

Ferti

lizer

s, in

sect

icide

s and

pe

stici

des,

farm

an

d br

eedi

ng

equi

pmen

t and

m

achi

ne sp

are

parts


nn

ex

B

Va

T/G

sT-e

xe

mP

T T

Ra

nsa

cT

ion

s in

Th

e a

sea

n

1

Part

icul

ars

Cam

bodi

a

(VA

T)

Lao

PDR

(V

AT

) T

haila

nd

(VA

T)

Vie

tnam

(V

AT

) In

done

sia

(VA

T)

Sing

apor

e (G

ST)

Mal

aysi

a (G

ST)

Mya

nmar

(C

T)

Edu

catio

n/

Edu

catio

nal

Supp

lies

E

duca

tiona

l op

erat

ions

su

ch a

s sc

hool

s,

cent

ers,

colle

ges a

nd

univ

ersit

ies

Publ

ic ed

ucat

iona

l se

rvice

s A

rt an

d cu

ltura

l w

orks

Re

sear

ch o

r ac

adem

ic se

rvice

s

Edu

catio

n an

d vo

catio

nal

train

ing

Edu

catio

nal

serv

ices

E

duca

tiona

l eq

uipm

ent

Gra

phite

s and

pe

ncils

; slat

es,

slate

pen

cils a

nd

chalk

; var

ious

ru

lers,

eras

ers a

nd

shar

pene

rs

Hea

lth/M

edic

al

prod

ucts

/ser

vice

s H

ospi

tal,

clini

c, m

edica

l and

de

ntal

serv

ices

Med

ical

serv

ices

such

as

exam

inat

ion,

di

agno

sis

Phar

mac

eutic

al or

che

mica

l pr

oduc

ts

Med

ical s

ervi

ces

of h

ealth

in

stitu

tions

Med

ical h

ealth

se

rvice

s and

ve

terin

ary

serv

ices

Med

ical a

nd

healt

h se

rvice

s Po

lio v

accin

es

M

edica

l eq

uipm

ent

Hou

seho

ld

med

icine

s and

ot

her

phar

mac

eutic

als;

X-r

ay fi

lm, p

lates

, m

edica

l and

su

rgica

l eq

uipm

ent

E

nerg

y

Fuel

and

othe

r oils

E

lectri

city

(6.6

00

wat

ts b

elow

)

Boo

ks a

nd

Publ

icat

ion

Pr

oduc

tion

and

Sale

of

text

book

s

New

spap

er,

mag

azin

e or

sc

hool

boo

ks

Publ

icatio

n,

impo

rtatio

n an

d di

strib

utio

n of

ne

wsp

aper

s, m

agaz

ines

, bo

oks,

and

prin

ting

of

mon

ey

Text

book

s

Book

s Ph

otog

raph

ic eq

uipm

ent

and

film

s Pa

per a

nd

prin

ting

indu

stry

Text

book

s, dr

awin

g/ex

ercis

e bo

oks,

pape

rs fo

r th

e pr

oduc

tion

of

book

s


nn

ex

B

Va

T/G

sT-e

xe

mP

T T

Ra

nsa

cT

ion

s in

Th

e a

sea

n

1

Part

icul

ars

Cam

bodi

a

(VA

T)

Lao

PDR

(V

AT

) T

haila

nd

(VA

T)

Vie

tnam

(V

AT

) In

done

sia

(VA

T)

Sing

apor

e (G

ST)

Mal

aysi

a (G

ST)

Mya

nmar

(C

T)

Med

ia/

Com

mun

icat

ion

Publ

ic Po

stal

Serv

ice

Publ

ic Po

stal

and

Telec

om

Serv

ices

Publ

ic ra

dio

and

telev

ision

br

oadc

astin

g

Lette

r deli

very

se

rvice

s; N

on-

com

mer

cial

broa

dcas

t se

rvice

s Pub

lic

coin

telep

hone

se

rvice

s

Tra

nspo

rtat

ion

Publ

ic tra

nspo

rt of

pa

ssen

gers

Airc

raft

and

equi

pmen

t fo

r air

trans

port

of

good

s V

ehicl

es fo

r sp

ecifi

c pu

rpos

es

such

as f

ire

en

gine

s, am

bulan

ces

and

natio

nal

defe

nse

Dom

estic

tra

nspo

rt Pu

blic

trans

port

by b

us a

nd

elect

rical

vehi

cles

Publ

ic tra

nspo

rtatio

n se

rvice

s Ch

arte

r or

purc

hase

of

aircr

afts

, Pu

rcha

se o

f ra

ilway

train

s

M

otor

cycle

s no

t exc

eedi

ng

200

cc c

apac

ity,

bicy

cles f

or

adul

t use

in

cludi

ng p

arts

an

d ac

cess

ories

; H

elico

pter

s, air

craf

t, sh

ips

and

othe

r ve

ssels

Fina

ncia

l Ser

vice

s In

sura

nce

Serv

ices

Bank

ing

serv

ices,

finan

cial

inst

itutio

ns

Hea

lth a

nd

life

insu

ranc

es

Li

fe/s

tude

nt

insu

ranc

e Cr

edit

serv

ices,

secu

rities

and

bu

sines

s ac

tiviti

es

Fina

ncial

se

rvice

s in

cludi

ng

lendi

ng,

borr

owin

g,

leasin

g;

Insu

ranc

e se

rvice

s; M

oney

re

mitt

ance

s

Fina

ncial

se

rvice

s, sa

le an

d lea

se o

f re

siden

tial

prop

ertie

s, an

d im

porta

tion

of

loca

l sup

ply

of

inve

stm

ent

prec

ious

m

etals

(IPM

)


nn

ex

B

Va

T/G

sT-e

xe

mP

T T

Ra

nsa

cT

ion

s in

Th

e a

sea

n

1

Part

icul

ars

Cam

bodi

a

(VA

T)

Lao

PDR

(V

AT

) T

haila

nd

(VA

T)

Vie

tnam

(V

AT

) In

done

sia

(VA

T)

Sing

apor

e (G

ST)

Mal

aysi

a (G

ST)

Mya

nmar

(C

T)

Oth

ers

Non

-pro

fit

activ

ities

; an

d no

n-ta

xabl

e su

pplie

s for

di

plom

atic

miss

ions

and

in

tern

atio

nal

orga

niza

tions

Act

iviti

es

relat

ed to

ta

x or

po

stag

e st

amps

for

offic

ial u

se

Impo

rtatio

n of

ch

emica

ls,

equi

pmen

t an

d m

ater

ials

that

can

not

be m

ade

loca

lly, g

old

bars

, pr

intin

g of

ba

nk n

otes

, an

d m

intin

g of

coi

ns,

good

s for

sa

le to

di

plom

ats

Goo

ds a

nd

serv

ices t

o gr

ant a

id

proj

ects

Acc

ount

ing,

lawye

r and

m

edica

l se

rvice

s Li

brar

y, m

useu

m a

nd

zoo

serv

ices

Und

er

empl

oym

ent

cont

ract

se

rvice

s A

mat

eur s

ports

E

xem

pt o

n th

e su

pply

of

good

s and

se

rvice

s: M

inist

ry o

r de

partm

ent

whi

ch re

mit

all

reve

nue

to th

e st

ate

with

out

dedu

ctin

g ex

pens

es,

relig

ious

or

publ

ic ch

arity

in

Tha

iland

Pr

escr

ibed

by

Roya

l Dec

ree

Goo

ds e

xem

pt

from

impo

rt du

ty, a

nd d

uty

exem

pt g

oods

un

der c

usto

ms

care

. Re

ntal

of

imm

ovab

le

Wat

er su

pply

&

drain

age;

Stat

e ow

ned

hous

es

sold

to te

nant

s; Tr

ansf

er o

f lan

d us

e rig

hts;

Spec

ialize

d ar

ms a

nd

wea

ponr

y fo

r na

tiona

l de

fens

e; Im

porte

d go

ods

for

hum

anita

rian

and

non-

refu

nd

aid; G

ifts t

o St

ate

bodi

es,

dona

tion

and

gifts

in

Viet

nam

; Pe

rson

al ef

fect

s of

fore

ign

indi

vidu

als a

nd

orga

niza

tions

; go

ods a

nd

serv

ices s

old

to

inte

rnat

iona

l or

gani

zatio

ns

and

fore

ign

indi

vidu

als;

Goo

ds in

bo

rder

gat

e tra

nsit

or tr

ansit

vi

a V

ietna

m

terr

itory

Te

chno

logy

Goo

ds

prod

uced

by

min

ing

or

drill

ing

that

are

ta

ken

dire

ctly

from

their

so

urce

, i.e.

, cr

ude

oil,

natu

ral

gas,

geot

herm

al en

ergy

, san

d an

d gr

avel,

coa

l and

ha

rd ro

ck o

res

Food

and

beve

rage

s sol

d at

hot

els,

rest

aura

nts,

stall

s M

oney

, gol

d in

gots

and

ne

gotia

ble

inst

rum

ents

So

cial s

ervi

ces

inclu

ding

or

phan

age;

Relig

ious

se

rvice

s, A

rts

and

ente

rtain

men

t se

rvice

s; M

anpo

wer

, H

otel,

Par

king

, Ca

terin

g se

rvice

s M

achi

nery

and

ca

pita

l eq

uipm

ent

Cons

truct

ion

and

sale

of

Exe

mpt

on

Out

-of-s

cope

su

pplie

s ref

er

to su

pplie

s w

hich

are

ou

tsid

e th

e sc

ope

of th

e G

ST A

ct su

ch

as: s

ales w

here

go

ods a

re

deliv

ered

from

a

plac

e ou

tsid

e Si

ngap

ore

to

anot

her p

lace

outs

ide;

sales

m

ade

with

in

Free

Tra

de

Zon

e; sa

les

mad

e w

ithin

Z

ero

GST

w

areh

ouse

; an

d pr

ivat

e tra

nsac

tions

.

Exp

ort g

oods

sp

orts

equi

pmen

t, M

achi

nery

for

text

ile in

dust

ry,

food

pr

epar

atio

n in

dust

ry, ,

co

nstru

ctio

n in

dust

ry, m

etal

indu

stry

; ru

bber

and

th

eir re

lated

pr

oduc

ts;

natu

rally

oc

curr

ing

min

eral

subs

tanc

es,

chem

icals,

etc

.

Soap

stoc

ks a

nd

blea

chin

g su

bsta

nces

(of o

il re

sidue

), co

ir ya

rn,

feat

hers

, gu

n po

wde

rs,

dyna

mite

s, an

d ac

cess

ories

use

d by

the

civil

depa

rtmen

t, all

so

rts o

f sta

mps

, de

fens

e an

d m

ilita

ry st

ores

and

eq

uipm

ent,

seali

ng

wax

and

stick

s,


nn

ex

B

Va

T/G

sT-e

xe

mP

T T

Ra

nsa

cT

ion

s in

Th

e a

sea

n

Ref

eren

ce: N

TRC

Tax

Rese

arch

Jour

nal,

Volu

me

XXVI

.3, M

ay-Ju

ne 2

014

1

Part

icul

ars

Cam

bodi

a

(VA

T)

Lao

PDR

(V

AT

) T

haila

nd

(VA

T)

Vie

tnam

(V

AT

) In

done

sia

(VA

T)

Sing

apor

e (G

ST)

Mal

aysi

a (G

ST)

Mya

nmar

(C

T)

pr

oper

ty

Exe

mpt

on

expo

rts o

f go

ods a

nd

serv

ices.

trans

fers

; Gol

d im

porte

d in

bar

an

d fo

il an

d no

t ye

t pro

cess

ed;

Exp

ort

prod

ucts

; A

rtific

ial b

ody

parts

for i

ll pe

ople

and

spec

ialize

d ap

para

tus.

simpl

e ho

uses

, E

quip

men

t and

su

pplie

s use

d by

de

fens

e an

d po

lice

forc

es.



Documents

CPBRD Discussion Papercpbrd.congress.gov.ph/images/PDF Attachments... · 1 Title IV, NIRC, as amended by RAs 7716, 8241, 8424, 9238, 9337 and 9361. 2 Tax rate was increased from 10%