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VAT refund program expected to boost tourist spending

THE PHILIPPINE government’s move to grant value-added tax (VAT) refunds for foreign tourists is expected to boost the tourism industry’s recovery from the coronavirus pandemic.

President Ferdinand R. Marcos, Jr. is expected to issue an executive order to implement the VAT refund program for foreign tourists by 2024, Malacañang said on Sunday. No details were given.

“The VAT refund for tourists can (encourage) tourists to spend more here in the Philippines as this practice is also done in many developed economies with huge arrival figures,” John Paolo R. Rivera, an economist at the Asian Institute of Management, said in a Viber message.

The Philippines applies a uniform 12% VAT on nearly all sales of services and imports in the country.

Many countries currently offer VAT refunds to tourists upon their departure. For instance, tourists can claim a VAT refund on purchases made in European Union member countries, such as Spain, France and Italy, but the minimum purchase required to qualify for refunds would depend per country.

Aside from the VAT refund scheme, Mr. Marcos on Jan. 26 approved other recommendations by the Private Sector Advisory Council (PSAC) such as the rollout of e-visas by 2023 with priority given to Chinese and Indian nationals, and the removal of the One Health Pass.

The PSAC had also recommended the revocation of outdated advisories and loud-speaker announcements at all airports, as well as the automatic inclusion of travel tax in all airline tickets.

“These are great initiatives to energize tourism and create more jobs… We need initiatives like this to become world-class, then world-beating,” Makati Business Club Executive Director Francisco Alcuaz, Jr., said in a Viber message on Sunday.

The Department of Tourism (DoT) reported 2.65 million international visitor arrivals as of end-December 2022, which translated to P209 billion in tourism revenues. The DoT exceeded its target of 1.7 million tourist arrivals last year, as government began easing travel restrictions.

Of the total, there were 39,627 foreign arrivals from China and 51,542 from India.

While last year’s tourist arrivals are significantly bigger than the 163,879 recorded in 2021, it is still a far cry from the 8.6 million tourist arrivals before the pandemic in 2019.

Tourism-related jobs reached 5.23 million in 2022, the DoT has said.

The Philippine government is targeting 4.8 million international tourist arrivals this year.

“With pandemic-related travel restrictions lifted, we Filipinos are ready to showcase the Philippines as a world-class tourist destination. PSAC is in support of the administration’s tourism agenda, particularly in boosting infrastructure and systems that will support the many travelers looking to discover the unique beauty of our country,” Robinsons Land Corp. President and Chief Executive Officer Frederick D. Go, who was also PSAC Tourism Sector Lead, said in a separate statement.

The United Nations World Tourism Organization (UNWTO) has said international tourist arrivals are projected to hit 80% to 95% of pre-pandemic levels in 2023.

“The recent reopening of several Asian source markets and destinations will contribute to consolidating the recovery in 2023,” according to the UNWTO. — J.V.D.Ordoñez

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