CURRENT TAX ISSUES IN THE PHILIPPINES

1. VAT Refunds: Tax wise or Otherwise

The basic principles surrounding the Philippine value-added tax (VAT)

system except for certain specific transactions or taxpayers that are
exempt, any person who sells, leases or exchanges goods or services in the
Philippines is subject to VAT at the rate of either 0% or 12%. However, being
an indirect tax, the amount of VAT due from the seller is shifted or passed
on to the buyer of the goods and/or services sold. The buyer then becomes
entitled to claim the VAT paid as input tax credit against his output tax
liabilities. As such, a taxpayer shall only pay the difference between the VAT
on his own sales (output tax) and the VAT from his purchases (input tax).

In most cases, the amount of output tax will be more than the input tax,
resulting in a VAT remittance to the government. However, there are
instances when the opposite is true, particularly if the buyers own sales
transactions are subject to 0% VAT (such as in the case of export sales). In
such cases where the input VAT credits of a taxpayer exceed his output
VAT liabilities, the Philippine Tax Code allows the taxpayer to carry over such
excess to the succeeding quarters, or apply for a refund or issuance of a
tax credit certificate (TCC).

2. Tax Collection

The ones who are suffering the most in the continuing tax battle is the
practically non-existent middle class. Obviously, the poor dont have the
money to pay taxes and the rich have the means of protecting their assets.
Its those in the middle that are left with no defense and end up paying half
or more than half of what they earn being left with virtually nothing.

3. Too many goods and services are not being taxed

In the Philippines, too many goods and services are exempted from taxes.
For instance, our value-added tax (VAT) law has numerous exemptions
more compared with the VAT laws of other countries. The excessive
exemptions partly explains the relatively low tax revenues we get. If only
fewer goods were exempted or if only the exemptions were limited to
essential goods then the government could boost its revenues.