(Bloomberg) -- The Philippines’ largest exporter groups on Tuesday urged the government to exempt their local purchases from a 12% value-added tax to help them offer competitive prices in the international market.

A tax regulation implemented in June 2021 began imposing a 12% VAT on sales transactions that were previously not taxed, including purchases of exporters. A month later, the country’s tax agency suspended that rule amid the pandemic and while it reviewed the regulation further.

The government’s Fiscal Incentives Review Board could come up with a final decision on the tax issue this month. “Failure to address the VAT issue may have a crippling consequence on the parts localization initiatives of exporters and particularly affect their local suppliers who will be more at risk should they lose their market,” according to a joint statement from business-process outsourcing firms, electronics and garments exporters groups. 

“As exporters, these three industries have claimed VAT zero-rating on their purchases consistent with existing local regulations and globally accepted principles allowing for the sectors to remain competitive,” the group said.

Philippines Tax Agency Clarifies VAT Zero-Rated Incentives

The three industry groups generate annual combined revenues of about $83 billion, accounting for around 69% of the Philippines’ goods and services exports and contribute 20% to the nation’s gross domestic product, they said.

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