MANILA — Voting 20-1-0, the Senate has approved on third and final reading Senate Bill 2415 or the proposed Value Added Tax Refund for Non-Resident Tourists.

Senate Ways and Means Committee Chair Sherwin Gatchalian said the bill is aligned with the collective goal to complement the administration’s efforts to boost tourism.

"By allowing foreign visitors to claim VAT refunds on goods they purchase in our country, we create an environment that not only attracts more tourists but also encourages them to spend more on our products, which will eventually be taken out of the country,” Gatchalian said.

"This bill is not just about short-term gains; it is about the long- term growth of our tourism industry and economy as a whole. The revenue loss we may incur from these refunds will be offset by the increased spending of tourists, which in turn will generate more jobs, stimulate local industries, and ultimately boost our economic activity,” he added.

Citing data from the National Economic and Development Authority, Gatchalian said that in terms of net benefit, this fiscal reform is projected to generate an amount ranging from P3.3 billion to P5.7 billion per annum from 2024 to 2028.

"The proposed scheme is expected to create additional employment opportunities of 4.4 thousand to 7.1 thousand per annum from 2024 to 2028. This bill is an investment in our tourism sector, and, by extension, an investment in the livelihoods of many Filipinos who rely on this industry. With this, I humbly submit that the potential rewards of this policy far outweigh its risks,” Gatchalian said.

Senate Minority Leader Aquilino Pimentel III was the lone negative vote, saying it exposes the government to further tax leakages.

"We are effectively giving away Four Billion Pesos of Filipino taxpayers’ money to foreigners. The Special Fund comprised of five percent (5%) of all VAT collections from which VAT refund shall be sourced is mostly paid by Filipinos. This fund is for contingent VAT refunds; it is not meant to be exhausted simply because it remains underutilized,” Pimentel said.

Pimentel wants to instead direct these funds towards programs and projects that directly benefit the Filipino people.

Pimentel also wants a robust mechanism to separately track tourist expenditures and the corresponding VAT paid by them.

"The VAT to be refunded to the tourists should never exceed the total VAT paid by them. Otherwise, the system will be fundamentally flawed and unfair to Filipino taxpayers,” Pimentel said.

Pimentel maintained that the costs of implementing this program could outweigh its projected benefits.

"While potential earnings are estimated at Php3.3 billion to Php 5.7 billion, expenses, costs, and/or losses are projected at Php 2.9 billion to P4.1 billion. In addition, the government will incur additional expenses for engaging third-party VAT operators, along with administrative and other operational expenses, further diminishing the potential gains from this program,” Pimentel said.