Admin to stop issuance of TCCs

MANILA, Philippines - The Aquino administration will stop issuing tax credit certificates (TCCs) to businesses and would instead provide cash refund.

Budget and Management Secretary Florencio Abad said the government would start implementing the policy shift next year, with P8.3 billion allocated for cash refunds from the 2012 budget.

Abad said these so-called TCCs are susceptible to irregularities in utilization and that the issuance of these certificates is difficult to monitor.

TCCs are given to businesses that fulfill certain requirements for this incentive. Those that import raw materials that are then used to produce exports are among those qualified to avail of these certificates.

These TCCs can be used to settle their tax obligations.

TCCs are instruments that indicate the amount of tax credit that can be used by the holder to offset against tax liabilities, other than withholding tax.

Abad said cash refunds are deemed easier to administer.

“Cash refunds, on the other hand, are less burdensome in terms of accounting and bookkeeping. Moreover, it promotes transparency that will have a positive impact on the country’s investment climate,” Abad said.

The Budget chief noted that both the Japan International Cooperation Agency (JICA) and the Commission on Audit (COA) have said that these TCCs are susceptible to irregularities.

Outright cash refund will be sourced from the revenues of the Bureau of Internal Revenue (BIR), Abad said.

“Most of the TCCs for input VAT are issued by the BIR. Under the 2011 budget, P1 billion was provided under the special provision of the BIR where half of which will go for refund of input taxes for zero-rated or effectively zero rated transactions. The remaining P500 million is for refund of excess or erroneous collection of VAT and other internal revenue taxes,” Abad also said.

Finance Secretary Cesar Purisima, for his part, said the Department of Finance (DOF) is bent on streamlining the processing of VAT cash refund with evaluation, with the processing to be done by only one unit, either the BIR or the One Stop Shop and Duty Drawback Center (OSS) of the department.

According to the latest data from the DOF, there were 289 TCCs approved from January to April amounting to P1.096 million or 30.8 percent lower than the P1.584 million issued in the same period last year for 473 TCCs.

The government hopes to contain this year’s budget deficit at roughly P290 billion to P300 billion from last year’s P314.4 billion incurred last year.