BIR Ruling [UN-229-94]

July 28, 1994 BIR RULING [UN-229-94] The Hon. Harle Freeman-Greene Ambassador New Zealand Embassy Manila S i r : This refers to a fax message you sent us on June 22, 1994 thru Undersecretary Tomas I. Alcantara of the Department of Trade and Industry regarding your concern over the imposition of the 10% VAT on imported meat under Section 4 of R.A. No. 7716, otherwise known as the "Expanded VAT Law", specifically, Section 103(c) of the Tax Code, as amended, viz: cdtech "SEC. 103. Exempt transactions . The following shall be exempt from the value-added tax. xxx xxx xxx "(c) Sale or importation of agricultural and marine food products in their original state, except importation of meat, livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials therefor." You have, however, convened your message clearly that it is your opinion that subjecting imported meat to 10% VAT may be in breach of Art. III(2) of the GATT Law, which states, as follows: "ART. III. National Treatment on Internal Taxation and Regulation. xxx xxx xxx "(2) The products of the territory of any contracting party imported into the territory of any other contracting party shall not be subject, directly or indirectly, to internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic products. Moreover, no contracting party shall otherwise apply internal taxes or other internal charges to imported or domestic products in a manner contrary to the principles set forth in paragraph 1." Paragraph (1) of the same Article states as follows: "(1) The contracting parties recognize that internal taxes and other internal charges, and laws, regulations and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of products, and internal quantitative regulations requiring the mixture, processing or use of products in specified amounts or proportions, should not be applied to imported or domestic products so as to afford protection to domestic production." In reply thereto, please be informed that much as we desire to give consideration and incorporate your views in the implementing rules and regulations of the Expanded VAT Law (Rev. Regs. No. 10-94 dated June 14, 1994), the same could not be done at this point in time because the aforesaid Regulations have already been signed when we received your Fax Message. We agree, however, with your concern that subjecting imported meat to the 10% VAT might have an adverse effect on our international trade, and especially on New Zealand's exports to the Philippines. Rest assured that we will take such reasonable measures as may be available to us to ensure observance of the provisions of the "General Agreement on Tariff and Trade", particularly with regard to the provision of Article III(2) of the said Agreement, if indeed there is a technical inconsistency between the questioned provision of the Expended VAT Law, i.e., Section 103(c) of the Tax Code, as amended by R.A. No. 7716, and the letter and spirit of Article III(2) of the GATT Law. aisadc Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue