cpbrd discussion papercpbrd.congress.gov.ph/images/pdf attachments... · 1 title iv, nirc, as...
TRANSCRIPT
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
4 Value-added Tax in The PhiliPPines: ReVenue PeRfoRmance and The PRoPosed RefoRm
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
5Congressional PoliCy and Budget researCh dePartment
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).
6 Value-added Tax in The PhiliPPines: ReVenue PeRfoRmance and The PRoPosed RefoRm
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
7Congressional PoliCy and Budget researCh dePartment
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).
8 Value-added Tax in The PhiliPPines: ReVenue PeRfoRmance and The PRoPosed RefoRm
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
9Congressional PoliCy and Budget researCh dePartment
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
10 Value-added Tax in The PhiliPPines: ReVenue PeRfoRmance and The PRoPosed RefoRm
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;
11Congressional PoliCy and Budget researCh dePartment
- 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);
12 Value-added Tax in The PhiliPPines: ReVenue PeRfoRmance and The PRoPosed RefoRm
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
13Congressional PoliCy and Budget researCh dePartment
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.
14 Value-added Tax in The PhiliPPines: ReVenue PeRfoRmance and The PRoPosed RefoRm
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;
15Congressional PoliCy and Budget researCh dePartment
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.
16 Value-added Tax in The PhiliPPines: ReVenue PeRfoRmance and The PRoPosed RefoRm
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
17Congressional PoliCy and Budget researCh dePartment
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.
18 Value-added Tax in The PhiliPPines: ReVenue PeRfoRmance and The PRoPosed RefoRm
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
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)
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)
Fore
ign-
curr
ency
de
nom
inat
ed sa
les;
Sales
to ta
x-ex
empt
pe
rson
s or t
o en
tities
und
er a
sp
ecial
law
or b
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.
Inte
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
sea
cont
ainer
s, an
d se
rvice
s per
form
ed
on g
oods
stor
ed in
a
war
ehou
se u
nder
the
ship
by
juris
tic
busin
ess p
erso
n;
Sale
of g
oods
an
d pr
ovisi
on o
f se
rvice
s to
gove
rnm
ent
auth
oriti
es u
nder
a
fore
ign
loan
or
assis
tanc
e
proj
ect;
and
Sa
le of
goo
ds
and
prov
ision
of
serv
ices b
etw
een
a bo
nded
w
areh
ouse
and
ot
her b
onde
d w
areh
ouse
s or
betw
een
a du
ty
free
zon
e an
d ot
her d
uty
free
zo
nes.
Exp
ort o
f goo
ds
whi
ch is
not
ex
empt
und
er
Sec.8
1 (3
) of t
he
Thail
and
Reve
nue
Code
21Congressional 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
Sour
ces:
Gl
obal
Indi
rect
Tax
Serv
ices
201
5 As
ia P
acifi
c In
dire
ct Ta
x Co
untr
y Gu
ide,
by
KPM
G In
tern
ation
alW
orld
wid
e VA
T, G
ST a
nd S
ales
Tax
Guid
e, 2
016,
by
Erns
t and
You
ng
Nati
onal
Inte
rnal
Rev
enue
Cod
e (N
IRC)
N
TRC
Tax
Rese
arch
Jour
nal,
Volu
me
XXVI
.3, M
ay-Ju
ne 2
014
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)
good
s for
exp
orte
rs
with
exp
ort s
ales
exce
edin
g 70
%
annu
al pr
oduc
tion
Sale
of p
ower
or
fuel
gene
rate
d th
roug
h re
new
able
sour
ces o
f ene
rgy
such
as,
but n
ot
limite
d to
, bio
mas
s, so
lar, w
ind,
hy
drop
ower
, ge
othe
rmal,
oce
an
ener
gy, a
nd o
ther
em
ergi
ng e
nerg
y so
urce
s usin
g te
chno
logi
es su
ch a
s fu
el ce
lls a
nd
hydr
ogen
fuels
.
se
rvice
s, if
thes
e se
rvice
s ar
e re
lated
to
imm
ovab
le go
ods l
ocat
ed
outs
ide
the
Indo
nesia
Cu
stom
s Are
a
Sp
ecial
ized
War
ehou
se S
chem
e.
22 Value-added Tax in The PhiliPPines: ReVenue PeRfoRmance and The PRoPosed RefoRm
an
ne
x B
V
aT
/GsT
-ex
em
PT 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)
Agr
icul
ture
/ A
quac
ultu
re;
Inpu
ts to
A
gric
ultu
re
N
on-
proc
esse
d ag
ricul
tura
l/
hand
icraf
t pr
oduc
ts;
Crop
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
A
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
seed
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
, fr
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
23Congressional PoliCy and Budget researCh dePartmenta
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
24 Value-added Tax in The PhiliPPines: ReVenue PeRfoRmance and The PRoPosed RefoRm a
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
)
25Congressional PoliCy and Budget researCh dePartmenta
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,
26 Value-added Tax in The PhiliPPines: ReVenue PeRfoRmance and The PRoPosed RefoRm a
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.
27Congressional PoliCy and Budget researCh dePartment
28 Value-added Tax in The PhiliPPines: ReVenue PeRfoRmance and The PRoPosed RefoRm