MANILA, Philippines - The Bureau of Internal Revenue (BIR) has already drafted a revenue regulation that would implement the government’s new refund system for value added tax (VAT), BIR officials said.
“There will be a revenue regulation for that,” a BIR source said.
The revenue regulation would detail how the new VAT refund mechanism would be implemented. The new scheme will replace the government’s tax credit certificate (TCC) system.
The source said the issuance of the regulation is necessary because businesses have been asking the government to refund their VAT credits faster.
“A lot of businesses have been pushing for the refund,” said the official.
The BIR is expected to soon issue the revenue regulation.
Many businessmen said the outmoded TCC scheme traps their liquidity for as much as three years.
The new system hopes to prevent a repeat of the controversial TCC scam which occurred in the mid-1990s and defrauded the government some P2.5 billion in revenues.
To implement the new refund mechanism, the Department of Budget is allocating P9 billion for the first year.
The Aquino administration would allocate funds for the VAT refund scheme yearly starting this year to 2016, the DBM said.
President Aquino has issued Executive Order 68 which mandates the implementation of a five-year monetization program for VAT tax credit certificates issued by the BIR and the Bureau of Customs (BOC).
The program gives taxpayers the option to exchange their outstanding TCCs with cash at a discounted rate when collected in advance or the full cash value upon a particular maturity date.
The BIR and the BOC would verify outstanding VAT TCCs and would issue Notices of Payment Schedule to TCC holders.
With the EO, the two revenue agencies would no longer issue TCCs for VAT refunds.
A TCC serves as proof of a company’s claim for tax credits, which are granted either to exporting firms that are entitled to duty-free privileges or to those that have tax refunds. Holders may use these certificates in paying taxes. Fraud is committed when companies acquire the certificates illegally.
Under the existing system, TCCs are issued to tax payers 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.
The VAT credit monetization scheme would help address the problem of corruption that hounded the old system.
The new scheme would also encourage businesses to diligently and accurately pay their taxes.