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VAT refund for foreign tourists to revitalize tourism industry, drive economic growth

The proposed implementation of the value-added tax (VAT) refund program for foreign tourists could potentially revitalize the local tourism industry which in turn could help drive overall economic growth, Senator Win Gatchalian said.


PASAY CITY – VAT refund for foreign tourists to revitalize tourism industry, drive economic growth—Gatchalian. 10 Feb. 23 file. Photo by Mark Cayabyab/OS WIN GATCHALIAN

The chairman of the Senate Committee on Ways and Means said that the estimated foregone revenue from the implementation of the program is about P3 billion or about 0.08% of total government revenue which he says is a minimal amount compared to the revenue from potential tourist arrivals that can drive our overall economic growth. The internal estimate is based on pre-pandemic levels.

“The VAT refund program would incentivize foreign tourists into spending more money in the country in terms of shopping activities as well as spending on hotels, restaurants, and other recreation-related activities,” Gatchalian said.

“In the medium to long term, the program could attract more foreign visitors to the country, rejuvenate the local tourism industry, and create more employment opportunities for Filipinos,” he added.

At the House of Representatives, a technical working group has been formed to create the legislation for the program.

Malacañang announced weeks ago that the President had approved the recommendation of the Private Sector Advisory Council (PSAC) Tourism Sector Group to implement the refund mechanism for foreign tourists by 2024.

According to Gatchalian, such practice, commonly known as VAT refund, is common across the globe, particularly in Europe and Southeast Asia, to attract foreign tourists.

“Inaasahan nating magpapalakas ito ng ating turismo na siya namang tutulong para magkaroon ng trabaho ang karamihan sa ating mga kababayan at payabungin pa ang mga industriya na naapektuhan nang husto ng pandemya,” the lawmaker stressed.

The tourism department reported a total of 2.65 million visitors from February to December last year, significantly higher than the 163,879 tourists recorded in 2021, but considerably lower compared to the 8.26 million total number of tourists recorded prior to the pandemic.