New laws to boost investments, revenues

MANILA, Philippines — Finance Secretary Ralph Recto is optimistic about the Philippines’ economic prospects in 2025, fueled by the recent enactment of two key laws aimed at boosting the tourism industry and local spending as well as strengthening food security in the country.

President Marcos signed into law Republic Act No. 12079 or the Value-Added Tax (VAT) Refund Mechanism for Non-Resident Tourists Act and RA 12078 or the Amendments to the Agricultural Tariffication Act on Dec. 9.

A priority reform led by the Department of Finance (DOF), RA 12079 introduces Section 112-A in the National Internal Revenue Code of the Philippines, which states that tourists shall be eligible for VAT refunds on locally purchased goods.

With this, the Philippines positions itself alongside countries around the world with a standard VAT system in place, which is designed to incentivize foreign tourists to spend more in the country.

“It is high time that the Philippines catches up with countries around the world that have long implemented a standard VAT refund system. This strategic initiative aims to encourage foreign tourists to spend more in our country, stimulating our domestic economy. With increased tourism spending, we will have higher revenues to collect and we can create more jobs, raise incomes, and accelerate economic growth,” Recto said.

RA 12079 states that goods should be purchased by foreign tourists in duly accredited stores in person and should be taken out of the country by the tourist within 60 days from the date of purchase.

The value of goods purchased per transaction should be equivalent to at least P3,000 but the Secretary of Finance may adjust this threshold upon recommendation of the Commissioner of the Bureau of Internal Revenue (BIR) taking into consideration the consumer price index.

Such refunds may be made electronically or in cash and shall be drawn out from the Special Account in the General Fund as provided under Section 106 of the Code.

The DOF is mandated by law to engage the services of reputable and internationally recognized VAT refund operators to provide end-to-end solutions to the government to establish and operate a VAT refund system that is consistent with best practices.

The Finance Secretary, after careful consultation with the Department of Trade and Industry, the Department of Transportation (DOTr), the Department of Tourism, the National Economic and Development Authority, the BIR, and the Bureau of Customs, shall promulgate the implementing rules and regulations 90 calendar days from the effectivity of the new law.

The calculated foregone revenues of the law can be easily offset by the economic impact of bolstered tourism spending induced by the refund.

Data from the DOF shows that savings from the refund fully channeled into additional tourism spending may boost economic output by P2.8 billion to P4 billion annually.

On the other hand, RA 12078 enhances the capabilities of the government to protect Filipino consumers by extending market interventions to stabilize rice prices during periods of volatility and to prevent manipulative pricing and hoarding.

“The refinements to the Rice Tariffication Law are essential for the effective management of the Filipino household’s fundamental staple,” Recto said.

The law strengthens the regulatory function of the Department of Agriculture (DA), through the Bureau of Plant Industry (BPI).

Under this, the DA-BPI is authorized to require the registration and maintain a national database of all grain warehouses, storage facilities, silos, and controlled-temperature cold storages; conduct regular site inspections; and collect and analyze data on rice trade activities, in cooperation with the Philippine Statistics Authority, the Bureau of Customs, the National Food Authority, and other government agencies.

Meanwhile, the new law authorizes the DA Secretary, upon the recommendation of the National Price Coordinating Council, to declare a food security emergency on rice due to supply shortage or extraordinary increase in prices.

In addition, the Rice Competitiveness Enhancement Fund has been given an annual appropriation of P30 billion until 2031 to further improve rice farmers’ competitiveness and income.

It will also support other equally important programs, activities, and projects, including composting facilities for biodegradable wastes; pest and disease management; solar-powered water irrigation or impounding irrigation project; soil health improvement; and farming support programs of the DA and the National Irrigation Administration on contract farming.

The DOF’s priority reform measures advanced well in Congress in 2024. Among those successfully enacted that will fast-track the entry of more foreign investors into the Philippines include the CREATE MORE Act and the Public-Private Partnership (PPP) Code.

Meanwhile, among the priority revenue reform measures signed into law were the Ease of Paying Taxes Act, the Value-Added Tax  on Digital Services, the Real Property Valuation and Assessment Reform Act and the VAT Refund Mechanism for Non-Resident Tourists Act. All these will boost revenue collection and bring the Philippine tax system at par with global standards.

The President also signed into law the Amendments to the Agricultural Tariffication Act which enhances the capabilities of the government to protect Filipino consumers by extending market interventions to stabilize rice prices during periods of volatility and to prevent manipulative pricing and hoarding.

The rest of the DOF’s revenue reforms are in the advanced stages in Congress, namely the Rationalization of the Fiscal Mining Regime, the Excise Tax on Single-Use Plastic Bags, Package 4 of the Comprehensive Tax Reform Program and the Motor Vehicle Road User’s Tax.