PALACE UNVEILS P9.3-BILLION BUSINESS CASH TRANSFER

MANILA, APRIL 1, 2012 (TRIBUNE) More cash transfers, which are prone to politicial influence, were unveiled by President Aquino yesterday through Executive Order 68 that will monetize tax credit certificates (TCCs) worth P9.3 billion until 2016 on so-called input value added tax (VAT) given to businesses.

EO 68 was released yesterday but it was signed last March 27 based on a copy of the order.

According to the EO, the monetization program provides two options for VAT-registered taxpayers in getting the cash equivalent of their TCCs including the collection in advance from a trustee bank a discounted cash value of the TCCs and reimbursement of the full cash value of TCCs upon a “certain maturity date” to be determined by the Bureau of Internal Revenue (BIR) or the Bureau of Customs (BoC) pursuant to the implementing rules and regulations that will be issued to implement the EO.

It said the program covers outstanding VAT TCCs and outstanding VAT component of drawback TCCs, the funding for which will be sourced from the National Expenditure Program (NEP) in the yearly budget.

The EO tasked the Department of Budget and Management (DBM) and the Department of Finance (DoF) to oversee the program.

It said the DBM will ensure that the funding for the program in included in the yearly NEP based on the request of the DoF.

“Once approved, the DBM shall release the amounts appropriated for this purpose in the General Appropriations Act (GAA) upon the request of the DoF,” according to the EO.

The DoF, in turn, will direct the BIR and the BoC to verify the outstanding VAT TCCs.

It will also provide the confirmation letter of the national government to acknowledge that the outstanding VAT TCCs constitute a government obligation, favorably endorse to the agency concerned or to the Bangko Sentral ng Pilipinas (BSP) the application to secure the necessary financial features required in the issuance of investment certificates to improve the net proceeds of the beneficiaries, make arrangements with trustee banks on the requirements for the opening of special accounts and make available the facilities of the Bureau of Treasury (BTr) for the auctioning process to implement the program.

The BIR and the BoC will issue notice of payment schedules to TCC holders and government financial institutions wills serve as trustee banks and will set up a special trust account for the program.

Examination and recording of all transactions in the program will be undertaken by the Commission on Audit (CoA), based on the EO.

Aquino in his budget message in July last year committed to undertake the program which he said seeks to address the need of the government to be fiscally responsible and “to level the playing field in the case of taxes paid that should be refunded.”

He said of these tax credits, P9 billion is due for input VAT, mostly for exports.

TCCs, he said, tie up the liquidity of exporters, especially small and medium-scale firms.

“Since the TCCs could not be used for any other purpose, some small exporters have resorted to selling their TCCs at a discount to big exporters, particularly the oil firms which do not need tax breaks,” Aquino said.

Cash transfers is major pillar of the Aquino economic program with some P40 billion alloted in this year’s budget for the Pantawid Pamilyang Pilipino Program (4Ps) but critics said the programs are arbitrary and encourages political patronage.

Budget and Management Secretary Florencio Abad had said the shift to cash refund will reduce irregularities in the use of TCCs as a result of difficulty in monitoring its use.

“Cash refunds 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.

He added that outright cash refund will be sourced from the revenues of BIR, which is net of collections from input VAT and will have no impact on the budget deficit.

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

Abad said Finance Secretary Cesar V. Purisima has already committed the use of cash refund using the risk-based approach.

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, or be converted to a cash refund.

“A study of the Japan International Cooperation Agency affirms the findings of the Commission on Audit that TCCs are susceptible to irregularities in utilization and it is difficult to monitor,” Abad said.

“Cash refunds, on the other hand, promotes transparency that will have a positive impact on the country’s investment climate,” he said.

Since there is no ruling on how the TCCs should be used, holders of the certificates trade TCCs similar to financial instruments.

Aside from the annual P8.3 billion for cash refunds until 2015, the government will also monetize TCCs amounting to P709 million for 2012, Abad said. The monetization of the TCCs will total P9.3 billion from 2012 to 2015.

The Department of Finance is also bent on streamlining the processing of VAT cash refunds, with the evaluation and processing to be done by only one unit, either the BIR or the department’s One-Stop Shop and Duty Drawback Center. Rocky G. Nazareno


Chief News Editor: Sol Jose Vanzi

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