Home » Uncategorized » e-VAT not all that bad: AFPI

THE Aircargo Forwarders of the Philippines, Inc. (AFPI) sees a positive side to the implementation of the expanded value-added tax (e-VAT) in that it could initiate economic growth, association president Cynthia Reyes-Tsui told PortCalls. "Good economy would bring high confidence to both local and international investors. Subse-quently, there would be tremendous increase in the transfer of goods and services in the local and international markets. If this happens, there would be enormous growth in the logistics sector," Reyes-Tsui said.

In addition to the proper implementation of the e-VAT, the AFPI chief recommended that the government get rid of "colorum" businesses that destroy competi-tiveness among legal businesses. "These illegal businesses could sell their services at very low rates because they are not paying taxes." The freight forwarding business or company-to-company transactions are not affected by the e-VAT. Still, Reyes-Tsui sees a possible downside. "To mitigate the effects of the e-VAT, there must be specific provisions to address the peculiarity and complexity of freight forwarding business especially on tax compliance issues.

Right now, the freight forwarding industry has no separate Revenue Memorandum Circulars that define items that should be subject to the corresponding taxes.Reimbursable expenses that are paid/advanced by freight forwarders in behalf of the customers are not well defined," she said. Another adverse effect of the e-VAT not only on the logistics industry but also on all businesses nationwide is the 70:30 threshold on the input tax credit application against the output tax liability. The new law limits the application of input tax credits to only 70% of output tax. This means all companies will be remitting to the government a minimum of 30% output tax even if the companies still have a balance of input tax credits.

Based on the input/output tax ruling, the remaining unapplied input tax credits can only be refunded when a business closes its shop. "This is against the accounting principles of going concern which states that a business entity is established for an indefinite period unless for very justified causes to the contrary. No entrepreneur would ever close shop just to avail of the input tax credit refund," Reyes-Tsui said. Another adverse effect of e-VAT would be on consumers who will shoulder the additional tax, she added. – Chris Paringit

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