Foreign biz rejects 70% input VAT cap

FOREIGN investors have joined Filipino businessmen in demanding the immediate repeal of the provision on the 70-percent cap on the creditable input value-added tax (VAT) in the reformed VAT Law.
       The Joint Foreign Chambers of Commerce of the Philippines (JFC) said the provision restricts business activities as it hurts businesses whose profit margins are less than 30 percent.
       “Small businessmen, wholesalers, distributors and retailers, who normally need to stock inventory for long periods, are adversely affected by this provision,” the group said in a statement.
       The JFC noted that the provision forces businesses to lower their inventory to make sure that the input VAT credits would not exceed 70 percent of its output VAT for a given tax period.
       This, the group said, diminishes the potential sales.
       On the other hand, businesses that would try to recover lost ground by increasing their margins beyond 30 percent also lower potential sales because of higher prices.
       “The JFC asserts that this provision will ultimately result in a death spiral of businesses,” the group said.
       The foreign businessmen said the Department of Finance assertion that the imposition of the 70-percent cap would generate P6.9 billion in additional revenues for the government will not hold water in the long run because the contraction of business activities will ultimately lead to lesser taxes.
       Less inventories, for instance, will not catalyze strong sales because there will not be much to offer to the buyers.
       Earlier, the Philippine Chamber of Commerce and Industry and the Chamber of Automotive Manufacturers in the Philippines Inc., among others, had also called for the abolition of the input VAT cap provision. M. de Leon