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08 April 2012

Aquino administration allocate P9 billion for new VAT refund scheme

The 2012 national budget allocates P9 billion for the first-year implementation of the new value-added tax (VAT) refund scheme that was recently approved by President Benigno S. Aquino III through Executive Order (EO) No. 68.
Budget and Management Secretary Florencio B. Abad lauded the President for introducing the VAT credit monetization scheme in place of the “tedious, prolonged, and often corrupted process” of tax credit certificates (TCCs). He also said that this new scheme will even encourage businesses to diligently and accurately pay their taxes.
“Businesses, especially exporters, have been crying out for government to refund their VAT credits in an expedient manner. The outmoded TCC scheme traps their liquidity for as much as three years and exposes them to certain unscrupulous practices,” he said.
“President Aquino is committed to introducing fairness and regularity in managing revenues. By showing businesses that the tax credit system works in a predictable way, we are ultimately encouraging them to pay the correct taxes diligently,” he added.
Abad said the Aquino administration will allocate funds for the VAT refund scheme in the annual national budgets from 2012 to 2016. He added that for 2012, a total of P10 billion has been allocated for tax refunds, with P9 billion earmarked for VAT refunds.
President Aquino recently issued EO 68, which orders the implementation of a five-year monetization program for VAT TCCs issued by the Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC) that are held by VAT-registered taxpayers.
The monetization program gives taxpayers two options in encashing their outstanding TCCs: 1) collecting, in advance, a discounted value of their TCCs; or 2) collecting the full cash value upon a particular maturity date. The BIR and BOC will verify outstanding VAT TCCs and will issue Notices of Payment Schedule to TCC holders.
Beginning this year, the BIR and BOC will no longer issue TCCs for VAT refunds unless applied for by VAT taxpayers. Under the existing system, TCCs are issued to taxpayers to indicate their tax credits in lieu of a cash refund. These TCCs can be used to offset other tax obligations in the form of tax deductions; however, the system has been susceptible to irregularities.

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