Tourist VAT refund seen adding up to P13 billion to GDP

[KC813]

15 hours ago, Mike J said:

Sounds like smoke and mirrors and baffle them with BS to me.  If I understand their flawed logic it goes like this.

1.  Implementing a refund will reduce tax revenue by 3.4 to 5.1 billion peso.  A range that large leads me to believe the number is a WAG (see note)

2.  Doing a refund of VAT for tourists will generate increased tourism.  (I have doubts) 

3.  Increased tourism will mean more spending.  (Common sense, spending will always go up with more tourists)

4.  The increased spending will be 6 to 9 billion peso.  (Again I think is a WAG number)

5.  The increased spending into the economy will produce a multiplier effect.  <snip>Considering multiplier effects on other sectors, particularly retail trade, such a mechanism could redound to P8.6 billion to P12.8 billion in additional gross value added (GVA) per year.  This compares to the P4.7 billion to P7.1 billion in GVA currently.<end snip>  (Again these are WAG numbers)

And number 5 shows, to me anyway, how the whole argument breaks down.  The difference in GVA according to the WAG numbers would be somewhere between 3.9 and 5.7 billion peso.  The highest estimate of increase in the GVA is 5.7 billion peso (rebound from 7.1 to 12.8 billion).  12 percent of the that 5.7 billion comes to 684 million peso gain in tax revenue.  How in the hell does a VAT tax increase of 684 million offset a VAT loss of 3.4 to 5.1 billion? 

The program will however increase the number of folks who work for the government and they keep 15 percent of the VAT refund.  I think the people pushing this are looking to form an entire new department.  More jobs, more opportunity to get all four feet into the public trough? 

Note;  WAG = Wild Ass Guess

Another note - do we have any accountants on the forum who can check my logic and/or math for errors.  Maybe I am way off in my thinking?

 

 

I kept wondering about your "WAG" as I read, but halfway through #5 the meaning jumped out at me from the context!

I agree this looks like a pipe dream that only adds a new bureaucracy.  I also wonder if some national ego is also involved.  “Richer developed countries do VAT refunds.  If we do VAT refunds, we are like them”.

The Philippines isn’t a shopping destination for expensive/quality goods.  A VAT refund is essentially a (maybe) $12% rebate on qualified purchases.  A balikbayan who buys a refrigerator for the family on a trip home is going to make the purchase with our without a VAT refund.

[hk blues]

15 hours ago, OnMyWay said:

Usually you don't get the refund until you are leaving the country, so unless you are going to spend it at the airport duty free shops, it seems unlikely to be spend in the Philippines.

Yes, but I wasn't so much meaning the actual cash refund itself as much as the spending budget being expanded with the expectation of getting the refund.  

You have got me thinking though, can people easily exchange PHP abroad?  If not, they will have little choice but to use in the airport.