RP to pay VAT claims by Japan ODA contractors, says Andaya

THE government remains committed to paying the full amount of the total value-added tax (VAT) refund claims of Japanese contractors which were erroneously charged with VAT for projects financed under Japan official development assistance (ODA).
       Budget Secretary Rolando Andaya Jr. gave this assurance on Tuesday, adding that 85 percent of the P458.82 million total VAT arrears have already been paid as of March 30.
       Andaya said the remaining balance would be settled on July 2006 in time for the celebration of the 50th anniversary of diplomatic relations between the Philippines and Japan.
       The Japanese government extends two types of financial assistance to the Philippine government, namely, outright grant through the Japanese International Cooperation Agency, and the yen-denominated loan through the Japanese Bank for International Corp.
       The issue of unpaid VAT refund claims by Japanese contractors became a serious concern between the Philippines and the Japanese governments, which resulted in the suspension in the processing of projects under the grant facility since 2004.
       “But due to the collective efforts of concerned government agencies, about 85 percent of the total VAT arrears or P388.13 million have already been paid since two months ago,” Andaya said. The payment of VAT arrears, he added, initiated the resumption of the Japan grant-aid projects.
       Of the remaining balance of P71.2 million, the budget secretary said P48.22 million would be in the second quarter of this year upon approval of the proposed 2006 national budget.
       The P22.95 million is currently being evaluated by the Bureau of Internal Revenue (BIR) and would be chargeable against the BIR’s Tax Refund Fund, Andaya explained.
       Meanwhile, total outstanding VAT claims arising from yen-denominated loan amounting to P736 million are still being revalidated and evaluated by the Department of Finance (DOF) and the Japanese Embassy.
       “Reconciliation and validation of the final figures concerning yen loans are still being administered by the DOF and the Japanese Embassy,” Andaya said.
       The budget secretary nevertheless said that P824.05 million was already included in the 2006 proposed national budget for payment of VAT refund claims.
       “Hence, payment of claims is expected upon the approval of the General Appropriations Act of 2006,” he said.