House shelves proposed higher tax on luxury goods

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Metro Manila (CNN Philippines, October 4) — The House Committee on Ways and Means has abandoned a proposal to increase taxes on luxury items to 25% in lieu of a bill providing for value-added tax (VAT) refunds for non-resident tourists.

Albay Rep. Joey Salceda, chairman of the committee, on Wednesday told a forum on legislative reforms sponsored by the Philippine Stock Exchange (PSE) that imposing the so-called “luxury goods tax” is “no longer workable.”

"The luxury goods tax is already junked," Salceda said. "Why? Because the Speaker says, ‘let’s do the tourist VAT refund.’ We could’ve injected it into the EOPT (ease of paying taxes) but Sherwin Gatchalian wanted a separate bill.

Salceda explained that the proposed luxury goods tax has been scrapped due to the need to reimburse tourists for value added tax. Tourists are generally given tax refunds as an incentive to visit a country and do shopping.

"So if (tourists) pay ₱7 million for a belt, they would expect customs to refund the 25% of ₱7 million… it will just be stolen. So the House ways and means committee thought that it is not longer workable if we have to refund."

"The tourist VAT refund is to incentivize, as one of our come-ons to tourists… tayo na lang ang hindi gumagawa ng tourist tax refund [we're the only one not doing tax refund]," Salceda said.

House Bill 6993 filed by Salceda sought to amend the National Internal Revenue Code and raise the 20% tax currently imposed on luxury goods by 5%. The revenue estimate from passing the bill was pegged at ₱15.5 billion.

Among the items that would have been affected by the higher taxes were luxury watches, luxury cars, private jets, the sale of residential properties worth more than ₱100 million, leather products worth ₱50,000 and beverages worth ₱20,000.

The lower chamber already approved House Bill 7292 allowing non-resident tourist to claim a VAT refund on purchases of goods worth at least ₱3,000. A counterpart measure is pending in the Senate.