Senate Minority Leader Aquilino Pimentel III on September 16 strongly opposed Senate Bill number 2415, under Committee Report number 106, which seeks to implement a VAT (value added tax) refund mechanism for non-resident tourists.
He argued that “the estimated net benefit of PHP3.3 billion to PHP5.7 billion is almost equal to the PHP4 billion that we are planning to refund. Not to mention the administrative costs of setting up refund booths, hiring personnel, and managing the program, all of which will be borne by the government.”
“The resources we intend to give back to tourists could be better allocated toward projects that directly uplift our people.”
“We should be focusing on measures that strengthen our tax system, curb leakages, and use public funds efficiently to benefit Filipinos—our primary responsibility as legislators,” also said Pimentel.
While he recognized the value of encouraging Tourism to stimulate the economy, he assailed the measure as “misguided.”
Speaking on the Senate floor, Pimentel said the measure presents significant risks that far outweigh its projected benefits.
It was projected that this mechanism could lead to an average increase of 148,000 tourist arrivals from 2024 to 2028. It is even argued that an increase in tourist arrivals will result in increased spending by the tourists.
However, Pimentel noted that these are merely projections and will come at a cost.
He pointed out the government stands to refund over PHP4 billion to tourists over the next five years.
He questioned the eagerness of the government to give away PHP 4 billion of taxpayers’ money to foreigners, while millions of citizens continue to face hardship.
He related that this amount could build 1,600 new classrooms, or 138 to 190 kilometers of concrete roads. In terms of the Assistance to Individuals in Crisis Situation (AICS) program, PHP4 billion could support at least 400,000 college students, or 800,000 elementary or high school students in educational assistance, or provide cash relief assistance to at least 400,000 beneficiaries.””
“Better yet, why don’t we reduce taxes that directly benefit Filipinos,” he asked.
Moreover, the senator said unless there’s a robust mechanism to track actual tourist expenditures and the corresponding VAT paid by them, this proposal remains fundamentally unfair. He said the bill lacks the assurance that it will genuinely boost the economy or that VAT refunds will be claimed solely by bona fide non-resident tourists.
“We also need to weigh the cost of implementing this refund system. “
He said the Department of Finance (DOF) will need to engage internationally recognized VAT refund operators.
Finally, he pointed out this bill offers no clear mechanism to protect our local industries from potential harm.
“While I commend the good sponsor for the intent to make the Philippines competitive in the Tourism sector, I firmly believe that refunding VAT is not the only way to achieve this goal. If we want to attract more tourists, we should concentrate on improving their overall experience — by upgrading our infrastructure, enhancing safety, and improving travel and transportation, as well as accommodation,” he explained.
He said tourists will visit the country for its beauty, culture, and hospitality. By investing in the right areas, VAT refunds will not be needed to make the Philippines a desirable destination.
