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.

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.