Deputy Speaker LRay Villafuerte wants to make sure the country has an adequate and readily available supply of critical products such as medicines, vaccines, personal protective equipment (PPEs) and ventilators needed in the continuing fight against the coronavirus disease 2019 (COVID-19) pandemic.
To do so, Villafuerte has filed a bill exempting from the payment of taxes and customs duties all goods in the entire chain of the manufacture, production and distribution of these products that have been in huge global demand since the unprecedented health and economic crisis seized the world at the onset of 2020.
“The Philippines belongs to the top 20 developing countries with the highest number of COVID-19 cases.”
Under House Bill (HB) No. 7135 or the proposed “Pandemic Protection Act,” Villafuerte also proposed that local-based manufacturers who export these critical products be required to supply as high as 80 percent of their goods to the domestic market.
“This measure promotes and protects the manufacture or production of critical products, including repurposing of existing manufacturers, and supply of critical services. This includes their entire supply chain including their raw materials, packaging and its raw materials,” Villafuerte said in HB 7135.
He said the intention of the bill “is to be able to adopt efficient and effective measures that will prevent the overburdening of the healthcare system and, at the same time, develop the healthcare and manufacturing industries by also preserving and generating employment during the crisis.”
The tax breaks proposed under HB 7135 will last for three years or until the World Health Organization (WHO) declares the end of the pandemic, said Villafuerte, who was the lead author in the House of Republic Act (RA) No. 11469 or the Bayanihan to Heal as One Act.
Villafuerte was a member of the Joint Congressional Oversight Committee that monitored the implementation of RA 11469, and is co-chairman of the social amelioration cluster of the House Defeat COVID-19 Ad Hoc Committee (DCC) chaired by Speaker Alan Peter Cayetano.
To ensure an adequate and responsive supply of critical products and supplies during the pandemic, HB 7135 requires the government as procuring entity to give preference and procure critical products manufactured, produced or made in the Philippines.
The award of the contract for such critical supplies “shall be made to the lowest domestic manufacturer-bidder provided the bid is not more than twenty percent (20%) in excess of the lowest foreign bid” and that the bidder “has secured from the DTI a certification that the products, articles, materials, or supplies are produced, made or manufactured in the Philippines.”
Villafuerte said that as part of the HB 7135-proposed incentives for manufacturers, such local sales shall be classified as export sales so the firms could meet their export requirements.
“As such, the corresponding treatment, exemption on duties, taxes and fees, and other incentives warranted under the existing laws governing these export enterprises shall continue to apply,” the bill states.
These tax exemptions on local sales also cover export enterprises located in special economic zones (SEZs) with the status of separate customs territory under relevant laws.
As early as April this year, the government has already been exempting from the payment of duties and taxes the imports of medical equipment and supplies intended for healthcare frontliners to combat the COVID-19 pandemic.
The Board of Investments (BOI) has also opened the accreditation of companies manufacturing products that are related to the government’s effort to fight the COVID-19 pandemic on April 15, 2020.
In line with RA 11469 or the Bayanihan Law, the Department of Finance (DOF) has issued Revenue Regulations (RR) No. 6-2020 and Customs Administrative Order (CAO) No. 7-2020, implementing Section 4 of this new law that exempts the importation of PPEs, COVID-19 test kits, medical and laboratory equipment and devices, consumable medical supplies, medicines, and other supplies as may be identified by the Department of Health (DOH) from the value-added tax (VAT), excise tax, duties and fees.
Aside from the exemption, both orders reiterate that an incentive is available for the importation of materials needed to make health-related equipment and supplies by manufacturers included in the Master List of the Department of Trade and Industry (DTI) and other incentive-granting bodies.
The bill provides a P1 billion fund to the BOI to operationalize the mechanisms of the measure.
Citing a World Bank report, Villafuerte pointed out that the global markets for crucial COVID-19 products are highly concentrated. According to reports, only the European Union and four other countries—United States, China, Japan and Korea—account for 80 percent of total imports.
“The Philippines belongs to the top 20 developing countries with the highest number of COVID-19 cases, and these countries are heavily dependent on importation of the said essential products,” Villafuerte said.
Under HB 7135, critical products refer to “medicines, vaccines, personal protective equipment, ventilators and such other supplies or equipment, including its raw materials, required to address the pandemic as may be determined by the DOH and other relevant government agencies.”
Critical services refer to those required for the manufacture, production and distribution of critical products, which also includes “testing laboratories; waste management, including but not limited to waste segregation, storage, collection, sorting, treatment and disposal services; and other services as may be determined by the DOH and other relevant government agencies, the bill likewise states.
Manufacturers are require to apply for accreditation with the Department of Trade and Industry (DTI) through the BOI before they can avail of the tax perks, which include exemptions from the payment of customs duties, value-added tax (VAT), import processing fees, VAT on local sales and other charges.
Manufacturers that are registered with other Investment Promotion Agencies (IPAs) shall directly apply for authority to import with the concerned IPA.
Also covered by the tax exemption are manufacturers or producers of critical products that will relocate or expand operations in the Philippines provided that they meet the requirements under the bill.
The bill also provides a P1 billion fund to the BOI to operationalize the mechanisms of the measure.
Villafuerte is among the co-authors of the post-pandemic Better Normal for the Workplace, Communities and Public Spaces Act and the COVID-19 Unemployment Reduction Economic Stimulus (CURES) Act that were both principally authored by Speaker Alan Peter Cayetano.