Category: Business Mirror

THE camp of the former Speaker on Tuesday raised concerns over the use of the term ‘mastermind’ by Ombudsman Jesus Crispin Remulla while the preliminary investigation remains ongoing, saying such statements may create the impression that a conclusion has already been reached before the evidence and the defense’s arguments have been fully reviewed.

Lawyer Ade Fajardo said calling former Speaker Ferdinand Martin G. Romualdez a ‘mastermind’ before the completion of the investigation ‘could create an appearance of prejudgment.’

Fajardo said accusations should not get ahead of the legal process, particularly while the Office of the Ombudsman is still examining witness statements, supporting documents, and the defense’s submissions.

The defense has maintained that public statements suggesting guilt or prosecution before the evaluation of all evidence may create an appearance of prejudgment. It earlier asked Remulla to be recused from the case, citing concerns over statements he made regarding the investigation.

In a statement, Fajardo said the defense was concerned that previous public remarks could give the impression that a conclusion had already been formed and that evidence was being sought to support an earlier position.

‘Well, from our perspective, we are concerned that because of the many public positions taken by the current Ombudsman, it appears that there may already be a prejudgment or that a conclusion has already been formed, and that evidence is now being pursued merely to support a legal conclusion that, in our view, does not actually exist,’ he said.

He said witness statements remain subject to evaluation, especially as some accounts have changed and additional evidence has yet to be fully presented to the defense.

‘The problem we encountered there is that, at this stage of the investigation, our rules, our laws, and even the Constitution itself require fairness and impartiality,’ Fajardo said.

Fajardo added that labels made during a pending investigation may influence public opinion and affect the perception of the case before investigators determine the strength of the evidence.

He urged investigators to resolve the complaints based on evidence properly disclosed and weighed during the proceedings, rather than on statements or descriptions made while the investigation remains pending.

The defense also rejected the claim that the recantations of former marine Orly Guteza and members of the so-called ‘Maleta Boys’ should be treated as additional evidence strengthening the complaints.

Fajardo said the recantations do not automatically make the allegations stronger and instead raise questions about the credibility of the original statements.

Fajardo disagreed with Assistant Ombudsman Mico Clavano’s view that both the original accounts and recantations should be considered evidence, saying conflicting statements must be carefully evaluated before any legal action is taken.

He said witnesses withdrawing previous allegations do not strengthen the case but highlight issues that investigators must resolve.

The defense maintained that the complaints should rely on independent and credible evidence directly linking Romualdez to the alleged wrongdoing, not merely on the existence of conflicting statements.

Guteza and several former security aides of former Party-list Rep. Zaldy Co of Ako Bicol have recanted earlier claims involving alleged cash deliveries.

THE Department of the Interior and Local Government (DILG) has urged local governments (LGUs) to enforce preemptive and forced evacuations, particularly in flood- and landslide-prone areas, as heavy rains continue across parts of Luzon and the Visayas.

In an advisory, the DILG urged LGUs to immediately relocate at-risk residents to designated evacuation centers or other safe areas, stressing that early action is critical to prevent casualties and protect communities.

The advisory was issued amid threats of more rains because of Typhoon Pilandok and the prevailing southwest monsoon or habagat. Since August 1, the National Disaster Risk Reduction and Management Council (NDRRMC) said the death toll brought about by the combined effects of tropical storms Luis, Maymay, Neneng and the southwest monsoon climbed has to 34.

According to the DILG, LGUs must prioritize the safety and protection of vulnerable groups, including children, older persons, pregnant women, and persons with disabilities.

In barangays susceptible to moderate flooding, LGU or DRRMO personnel must closely monitor water levels and initiate preemptive evacuation when floodwaters are about to reach 0.5 meters, particularly among households along riverbanks vulnerable to erosion and slope undercutting.

In highly flood-prone areas, LGUs must immediately enforce preemptive evacuation protocols and clear obstructions along river channels to ensure the unimpeded flow of floodwaters. Residents are likewise urged to stay away from identified flash flood-prone areas.

For landslide-prone communities, barangays with lower susceptibility should coordinate with upstream communities on landslides that could cause river blockage and trigger debris flows. Moderately susceptible areas must immediately report ground cracks or unusual movement and undertake preemptive evacuation.

In areas highly susceptible to rain-induced landslides, preemptive evacuation is immediately recommended. Residents must not be allowed to return to affected areas until authorities have declared them safe for occupancy.

The DILG, in coordination with Philippine Institute of Volcanology and Seismology, also called for heightened vigilance in communities within identified lahar hazard zones, including the Pinatubo and Taal volcanoes lahar hazard areas.

Thousands of personnel from the National Police (PNP) and the Bureau of Fire Protection (BFP) are currently deployed to assist in evacuation centers and flood-affected areas, among others.

The DILG, likewise, urged the public to remain vigilant, voluntarily evacuate when necessary, and cooperate with government rescue entities to avoid untoward incidents.

Fueled by their game-changing ideas and innovative solutions to create a positive impact, 58 contestants and student organizations from more than 70 universities and colleges nationwide strutted their wares in the recently concluded Globe Launchpad: Student Grants Pitch Day 2026 held at Globe Telecom Plaza in Mandaluyong City.

Marketing Management students Alyssa Louise Layug, Sofia Marelle Sadiasa, and John Carlo Go from the De La Salle-College of Saint Benilde (DLS-CSB) were honored as one of the 12 winning teams in the competition.

The delegates belong to the Benilde Junior Marketing Association (BJMA), the official student organization of the Marketing Management Program under the School of Management and Information Technology.

BJMA made the cut for the Emerging Partner category, along with Ateneo De Manila University’s Blue Consulting Group (BCG), University of the East Caloocan’s Ang Alyansa ng Aktibong Bahaghari sa Silangan (ALAB), and Affiliated Stanford Entrepreneurial Students (ASES) Manila.

The participants proposed event concepts intended to empower students with meaningful insights, practical knowledge, and industry perspectives which will prepare them for the evolving landscape of business and marketing.

One of these was ‘Industry Expert Hour: Artificial Intelligence in Practice,’ which highlighted AI as a tool that enhances-rather than replaces-human capabilities, and promotes the ethical and responsible use of AI in both academic and professional settings. It encouraged students to embrace emerging technologies, as they continuously develop their own knowledge, creativity, and critical thinking skills.

They likewise pitched the ‘Digital Marketing Conference,’ which explored the latest trends in digital marketing, AI, content creation, branding, and analytics.

Marketing Management Program chairman Erickson Jao, MMC, CPM, served as the students’ mentor, alongside educators Mhendrit Venezuela, MBA, and Paulo Vincent Sandrio, MMC.

‘With Globe’s call to ‘Go Forward Together,’ our student organizations continue to show what youth-led events, innovation, marketing, and real-world impact can become,’ Jao stated.

Other perks of the program included student grants of up to P50,000, tools for students, live mentorship, on-the-spot feedback, social media features on Globe’s official channels, internship opportunities, and rewards.

THE National Bureau of Investigation (NBI) has warned the public against possible online financial scams being perpetrated with the use of the so-called International Mobile Subscriber Identity (IMSI) catcher device.

In an ambush interview, NBI Director Melvin Matibag described IMSI catcher as a device similar to a cell tower which is being used by criminals to mimic or copy signals from mobile phones in order to obtain information, such as credit card data and personal details.

Matibag issued the warning following the recent arrest of a Chinese national who was found in possession of the said device inside his vehicle.

The foreigner, according to the NBI chief, was arrested by members of the NBI-Special Action Force after tailing him from Pasay City to General Trias, Cavite.

‘We were able to track the individual and eventually caught him while in possession of the device which he was using for phishing or other online scams,’ Matibag said.

Matibag said the person will be charged with unauthorized possession of telecommunications equipment, cybercrime offenses provisions and financial fraud.

‘We are reporting this because we want to warn the public not to immediately rely on suspicious text messages, especially when the sender’s number is unknown,’ the NBI director said.

Matibag said the NBI is conducting further investigation to determine if there are other individuals working with the suspect.

THE Social Security System (SSS) sees room to be more aggressive in managing its assets, as higher interest rates provide an opportunity to boost returns and push investment income toward P71.412 billion this year.

In a press briefing on Tuesday, SSS President and Chief Executive Officer Robert Joseph M. De Claro said the state-run pension fund booked a net income of P55.5 billion as of July 2026, up from P48 billion a year earlier.

Income from investments, which stood at P27.157 billion in the first half of the year, is projected to reach P71.412 billion by year-end.

SSS Executive Vice President for the Investments Sector Ernesto D. Francisco Jr. said government securities will be the biggest contributor to investment income, as they account for about half of the pension fund’s investment portfolio.

Of the pension fund’s total investments worth P1.271 trillion as of end-June, government securities accounted for P629.050 billion.

SSS expects a return of P34.748 billion by yearend from this, providing a stable and secure foundation for the pension fund.

‘We are comparing our portfolio regionally and globally. We are actually still quite conservative,’ Francisco said. ‘We should be adding a little more aggressiveness because half of our portfolio is in government securities.’

With the Bangko Sentral ng Pilipinas (BSP) raising the key policy rate to 5 percent, Francisco said SSS could also benefit from the high-interest-rate environment and earn better returns on new investments, with prospective investments expected to generate yields of around 7 to 8 percent.

‘But we cannot hope for interest rates to remain high forever because high rates also affect the overall economy,’ Francisco said. ‘Still, we have a very robust portfolio, and we have been here for 67 years.’

Fresh hostilities in the Middle East also present opportunities for SSS, particularly given its holdings in US dollars.

Francisco said the pension fund could potentially sell some of its dollar holdings to help fund the 13th-month pension, or annual cash gift, it automatically credits to all eligible pensioners.

‘Whatever the situation, we look for opportunities. That is what we focus on rather than dwelling on the situation,’ Francisco said.

By the end of 2026, SSS expects to have P15 billion in foreign investments, based on its year-end estimates.

Under its charter, SSS can invest 1 percent of its investment reserve fund in foreign investments during the first year. This can be increased by 1 percent for each succeeding year, up to a maximum of 15 percent of the fund.

Other sources of investment income include equities and member loans, with SSS expecting P8 billion from each, as well as corporate notes and bonds with returns of P5.363 billion by year-end.

‘A big thrust that we’re doing is we’re trying to improve our loan portfolio. Our loans on average earn 200 basis points more than government securities. But they’re almost as safe because they’re secured by their contributions or their pensions,’ noted Victor Alfonso A. Limlingan, commissioner of the Social Security Commission.

SSS likewise estimated P11.763 billion in income from its property investments by year-end, providing a stable and good source of returns.

SSS expects its assets under management to grow to P1.5 trillion by the end of the year from the current P1.3 trillion, representing an expected increase of about P200 billion, Francisco said.

A former deputy governor of the Bangko Sentral ng Pilipinas (BSP) warned against the economy holding on to a negative real interest rate-when the nominal interest rate is lower than the country’s inflation rate-as the loss of purchasing power to inflation would be greater than the return earned on money.

In a commentary last Tuesday, former BSP Deputy Governor Diwa C. Guinigundo wrote that ‘a nominal policy rate of 5 percent may sound restrictive. But when inflation is above 6 percent, the real cost of money remains negative.’

Explaining further the concept behind a ‘negative real cost of money,’ Guinigundo told the BusinessMirror that the real cost of money is the nominal interest rate adjusted for inflation.

‘If the policy rate is 5 percent while inflation is above 6 percent, the real policy rate is still negative. In effect, the purchasing power lost to inflation is greater than the nominal return earned on money,’ he told this newspaper.

At a 5-percent policy rate and July headline inflation of 6.2 percent, Guinigundo explained in his commentary that the ex-post real policy rate remains about negative 1.2 percent.

Using the BSP’s own 2026 inflation forecast of 6.1 percent, the ex-ante policy rate is around negative 1.1 percent.

Even against its 2027 inflation forecast of 5.4 percent, it remains ‘slightly negative,’ added the former BSP deputy governor.

Anchored less firmly

WITH this, Guinigundo told the BusinessMirror, the main risk ‘is that monetary policy may not be restrictive enough to bring inflation back to target.’

‘Negative real rates can encourage borrowing and spending, discourage saving, and sustain demand even when the economy needs some cooling,’ he added.

Moreover, he said negative real rates can weaken the peso by making peso assets ‘relatively less attractive,’ especially if markets expect inflation to remain elevated.

‘If this persists, inflation expectations can become less firmly anchored, making inflation harder and more costly to bring down later,’ added Guinigundo.

Negative real rates impact

FOR households, he told the BusinessMirror that borrowers may still find credit ‘relatively inexpensive’ in real terms, while savers and fixed-income earners can see the real value of their money eroded by inflation.

This, he pointed out, can encourage consumption rather than saving.

For businesses, Guinigundo said negative real rates can support borrowing and investment, which he said is ‘positive’ if directed toward productive activities.

‘But if inflation and uncertainty remains high, businesses may still hesitate to invest despite relatively cheap money,’ Guinigundo emphasized.

‘The bigger issue is therefore not just the cost of credit, but confidence in future demand and economic conditions,’ he added.

For markets, Guinigundo said ‘persistently’ negative real rates can put pressure on the peso and encourage investors to seek better real returns elsewhere.

‘This is important because a weaker peso can, in turn, add to imported inflation, particularly through fuel and other dollar-priced commodities,’ he explained.

As such, he said the policy message is quite clear: ‘Monetary policy cannot a?ord to look only at the nominal rate. What matters is the real stance. With inflation still above 6%, a 5% policy rate remains accommodative in real terms.’

Direction correct

MOVING forward, Guinigundo pointed out that the challenge is to bring inflation down without unnecessarily sacrificing growth.

‘And that requires not only appropriate monetary policy but also credible fiscal and economic management and stronger supply-side measures,’ he added.

Guinigundo explained the concept behind real interest rate after he released a commentary that scrutinized the BSP’s forward guidance after the Monetary Board held its monetary policy meeting last August 27.

The BSP raised its policy rate by another 25 basis points last Thursday, bringing the target reverse repurchase rate to 5.0 percent.

‘It was the right direction,’ Guinigundo wrote.

However, he pointed out that the ‘more important question’ is whether it was enough and, more importantly, whether the BSP’s message was ‘strong enough to convince markets that it remains firmly committed to bringing inflation back to target.’

Reaction to hike

STILL, the former BSP deputy governor said the market’s immediate verdict was ‘hardly reassuring.’

Guinigundo noted that instead of strengthening after the MB’s decision, the peso weakened further, closing at a new record low of P61.888 to the dollar on Thursday and breaching P62 on Friday, at P62.265.

To be sure, he said the peso is influenced by global dollar strength, oil prices and other external forces.

But he pointed out that the peso’s immediate reaction to a rate hike is ‘nevertheless instructive,’ adding that the market did not seem ‘full convinced’ that the central bank had signaled an ‘unambiguous commitment to staying on top of inflation.’

With this, he said the issue is not simply whether the BSP should raise, hold or eventually cut its policy rate.

‘The more fundamental question is whether monetary policy is sufficiently restrictive in real terms to bring inflation back to target and keep expectations firmly anchored,’ added Guinigundo. He said the 25-basis-point increase therefore did not suddenly transform monetary policy from accommodative into restrictive. Instead, it merely made an accommodative real stance ‘somewhat less accommodative.’

Expectations shaped

FURTHER, Guinigundo said the BSP had earlier indicated that it could afford to be less aggressive because of the slowdown in economic activity, while ‘qualifying’ that position by the need to see a more convincing decline in inflation.

‘But markets may have interpreted the message as suggesting that the tightening cycle is already nearing its end,’ he pointed out.

Guinigundo then emphasized that central banking is partly about the current policy rate. ‘But it is also about shaping expectations of where policy is going,’ he added.

‘If households, businesses and markets begin to believe that the central bank is becoming more concerned about weak growth than inflation that remains substantially above target, expectations can become less firmly anchored. Once that happens, monetary policy may have to do considerably more later than it would have had to do today,’ he further explained.

A ‘preemptive move’

AT the monetary policy briefing on Thursday, BSP Governor Eli M. Remolona Jr. said they are ‘hoping that we won’t need another rate hike.’

However, Remolona also noted that the MB ‘will tighten as much as we need to, to bring the inflation rate down to its target.’

‘The [MB] is prepared to take monetary policy action as warranted to ensure that inflation returns to the 3-percent target, in keeping with its price stability mandate,’ the BSP said in a statement last Thursday.

The central bank said the measured increases in the policy rate will continue to anchor inflation expectations and mitigate the risk of further second-round effects.

FOODPANDA platform operator Delivery Hero Philippines Inc. is looking increasingly beyond Metro Manila as thousands of small and medium-sized businesses in regional markets become a growing part of its merchant base.

The Foodpanda GmbH Philippine subsidiary now operates in 150 cities and municipalities nationwide, reflecting its expansion from its domestic launch in June 2014. The company works with thousands of partner vendors and delivery partners across the country, its current profile read.

According to Delivery Hero PHL Growth and Marketing Director Patricia Jacinto, the company’s regional presence is increasingly tied to the growth of local businesses that remain rooted in the communities they serve.

‘MSMEs (micro, small and medium enterprises) outside Metro Manila are an increasingly important part of foodpanda’s business, with thousands of partner vendors across regional markets,’ Jacinto told the BusinessMirror.

She added the platform continues to see growth in its merchant base and overall business performance outside the capital.

Davao, for instance, has emerged as one of the regional markets where Foodpanda GmbH is seeing expansion among local merchants, according to Jacinto. Some of these businesses are using digital platforms to bring local food products and flavors into the wider online marketplace.

MSMEs make up the overwhelming majority of nationwide merchant base actively using the foodpanda platform, she said, mirroring the broader business landscape where more than 99 percent of establishments are classified as MSMEs, according to the Philippine Statistics Authority. The company’s push into regional markets comes as digital platforms become another sales channel for businesses outside major urban centers, although Jacinto said simply getting online is not enough. The regional push also mirrors Foodpanda GmbH’s broader expansion across Asia. The company operates in more than 400 cities across 11 Asian markets, including the Philippines, according to its corporate profile.

In December 2025, Delivery Hero PHL reported a double-digit year-on-year increase in merchant sign-ups across Asia and said it would expand its merchant-support programs across its Asia-Pacific markets in 2026.

The company said regional programs are expected to focus on areas such as merchant onboarding, digital tools and other support mechanisms for small businesses.

Riders and the platform economy

ALONGSIDE merchant expansion, Delivery Hero PHL continues to participate in discussions on rider welfare and social protection as policymakers examine the future of platform-based work, the company said in a statement.

Jacinto said the company supports stronger protections for riders but maintained that any regulatory framework should consider the operating realities of digital platforms.

‘We support stronger rider welfare and social protection, but any framework needs to be sustainable and responsive to the realities of platform-based work,’ she told the BusinessMirror. ‘We believe this is best developed through continued dialogue between government and industry.’

According to the company, its riders are covered by insurance during active sessions, including benefits for accidental death, permanent total disability and accidental medical expenses.

The company also said it continues to engage with government agencies, local government units and industry groups on issues involving the platform economy, including discussions with the Department of Labor and Employment on decent work and rider welfare.

SLOWER credit growth could weigh on domestic demand as the central bank’s tightening cycle starts to bite, according to the University of Asia and the Pacific (UAandP).

In the August issue of ‘The Market Call,’ UAandP economists said credit conditions are beginning to cool as businesses and households become more cautious about taking on new debt amid elevated borrowing costs.

‘Continued lending to productive sectors should cushion the slowdown, but weaker construction and consumer credit could increasingly weigh on investment and consumption,’ the document read.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that the growth of bank lending slowed to 9.8 percent year-on-year in June from 12.1 percent in May, reaching a four-month low as credit demand adjusted to elevated borrowing costs. Outstanding bank loans stood at P14.88 trillion.

The slowdown, however, was uneven across sectors. Lending to businesses grew 9.2 percent, led by those in the electricity, gas, steam and air-conditioning supply sectors. Lending to the latter expanded 22.6 percent.

Loans to wholesale and retail trade rose 7.6 percent while real estate lending grew 6.1 percent. Construction lending, however, contracted 13.9 percent year-on-year.

Consumer borrowing also moderated, with consumer loan growth easing to 17.8 percent in June from 19 percent in May. Credit card lending still grew 24.9 percent, while motor vehicle loans increased 8.6 percent.

‘The key risk is that further moderation in credit growth begins to drag on domestic demand,’ the UAandP noted.

The softer credit environment comes as UAandP expects economic growth to remain weak in the third quarter before gaining momentum toward year-end.

UAandP expects third0quarter growth to remain close to the 2.3 percent pace recorded in the second quarter, citing August flooding and delayed infrastructure spending as major factors.

The Philippine economy grew 2.3 percent in the second quarter of 2026, slower than the 2.8 percent expansion in the first quarter, according to the Philippine Statistics Authority (PSA).

UAandP economists expect growth to pick up in the fourth quarter as government infrastructure spending returns, with quarterly growth potentially moving above 4 percent.

‘The return of government infra spending, softer crude oil prices, and better demand conditions are tailwinds to watch out for,’ read the report.

The think tank’s expected recovery, however, faces continued price pressures, with inflation seen remaining above the BSP’s target through 2027.

The UAandP cited geopolitical tensions, agricultural damage from heavy rains, a potentially aggressive dry season, and minimum-wage adjustments as risks to the inflation outlook.

YOU end up a pathetic sight, and that’s almost unacceptable.

But that’s what happened to Novak Djokovic on Monday.

Truth has always a way of hurting mortals.

The hard-headed suffer, but, mostly, because they never listen.

Djokovic, already a certified legend years back, still loves clinging on to glory, hunting for more.

But like all the rest before him, he’d also be denied-even swallowed like a luckless prey in accordance with the lamentable laws of nature.

It was the first round for Djokovic in the US Open.

The almost sell-out crowd at Flushing Meadows in Queens, New York, came and wanted to savor Djokovic’s continuing, almost deathless, campaign to chase history.

Instead, they had the horror of their lives.

Djokovic was beaten in five sets by a nondescript Argentinian named Mariano Navone.

Djokovic was in the match only in the first three sets, where he had taken command, 6-7, 7-5, 6-4.

Good result by any yardstick of standard. Bravo!

But the celebration was short-lived.

Thus, it was no surprise that Djokovic disappeared in the last two sets, where Navone literally imposed his will with his 6-2, 6-1 performance to advance to the second round.

Already, Djokovic has 24 Grand Slams. The only man to have achieved that.

But he is tied with Virginia Wade for the all-time best record in the majors.

He hates that.

He wants to be alone at the top.

And so, for the last three, four, years or so, he’s been trying to win his 25th.

But, then, comes the eternal question in sports: Which goes first, the knee or the mind?

Of course, the knee. Age. While the mind is constant, not the knee.

Among athletes, the saying, ‘What the mind can conceive, the body can achieve’ is a complete fallacy.

Tiger Woods has 15 majors in golf but as he aged, his dream of equalling, surpassing, Jack Nicklaus’ all-time best of 18 Slams has remained just that: a dream.

Father Time is unbeatable.

Navone might be a nobody, but anyone making it to the main draw of a major is never a patsy.

History is replete with stories about rookies running away with titles in a most dramatic manner.

Djokovic was old hat at 39 pitted against the bull-strong, 25-year-old Navone.

And because Djokovic has seen better days, his body parts are now prone to injuries.

Thus, cracks and creaks showed in the fourth set, Djokovic succumbing to four double faults. In the ensuing three-minute timeout, Djokovic’s tightening back was massively massaged.

Not enough.

Stubborn as a mule, Djokovic played on.

He was dismantled in the fifth set, where he shed a tear or two after salvaging one game-the fourth-before Navone completed the match-clinching 6-1 win.

The crowd stuck by Djokovic, giving him an ovation as he walked away from the court. Surely, they love him-still.

Djokovic’s wife, son and daughter, also stood up in the gallery to applaud-never stopping until after Djokovic had finished signing autographs.

No, Djokovic was not beaten. He just grew old.

THAT’S IT Happy 60th wedding anniversary (September 3) to Atche Pat and Jake P. Ayson! The Power Couple are going strong as ever. Their secret? They get plenty of sleep, eat well, walk a lot, are friends to all, laugh out loud, love so well and, most important of all, they love God with all their heart, soul and mind. Cheers!

What happens to a VAT refund claim after it has been finally denied by the BIR or the courts?

The usual reaction is to consider the matter closed. The taxpayer claimed a refund, the claim was denied, and the amount is lost.

But is that necessarily the correct result?

A related question is whether a taxpayer should be allowed to return the denied amount to its VAT return as unutilized input VAT or, if that is no longer possible, recognize the amount as a loss for income tax purposes.

This issue deserves attention because not all denied VAT refund claims are denied for the same reason.

When a taxpayer files a VAT refund claim, the amount being claimed is effectively removed from the unutilized input VAT portion of the VAT return and transferred to the portion relating to the amount being claimed for refund. The taxpayer is no longer intending to carry the amount over as input VAT; it is seeking to recover it through a refund.

But what if the refund is later denied?

One case that provides guidance is a decision of the Court of Tax Appeals (CTA) in CTA EB No. 1786. The taxpayer had applied for a refund of input VAT. The claim was eventually denied by the Department of Finance. The taxpayer then wrote off the denied amount and claimed it as a deduction from gross income.

The CTA En Banc allowed the deduction. It found that while the Tax Code specifically provides refund or tax credit as a means of recovering unutilized input taxes attributable to zero-rated sales, it did not categorically prohibit another mode of recovery.

The court therefore allowed the taxpayer to recognize the amount as a loss. It is worth noting that the denial was mainly due to non-compliance with invoicing requirements.

The decision, however, did not settle the issue.

The BIR subsequently took a different position.

In BIR Ruling No. 16-2024, a taxpayer cited the decision in CTA EB No. 1786 in asking whether an unclaimed or denied VAT refund could be recorded as a miscellaneous expense for income tax purposes.

The BIR said no.

Among the reasons given was that the Tax Code provides refund or tax credit as the means of recovering unutilized input VAT attributable to zero-rated sales. The BIR also took the position that the rule of following prior court rulings applies only to decisions of the Supreme Court and that a CTA decision does not have the same binding effect.

The BIR consequently relied on RMC No. 57-2013, which provides that unutilized creditable input taxes attributable to zero-rated sales may only be recovered through a refund or tax credit.

Thus, the BIR’s present administrative position is that a denied VAT refund cannot simply be converted into an income tax deduction.

The CTA En Banc decision mentioned above remains relevant. It provides judicial support for treating a finally denied claim as a loss, although taxpayers adopting this position should recognize the possibility of a BIR challenge during an audit.

There is another issue, perhaps more important: What happens to the input VAT itself?

In BIR Ruling No. 45-2023, the BIR denied a taxpayer’s request to reverse or return a denied refund claim as excess input VAT in a subsequent VAT return. According to the BIR, the Tax Code does not provide that a denied refund claim may be recovered through a reversal or return to the VAT return.

I believe a distinction should be made here.

A refund claim can be denied for different reasons. A taxpayer may fail to provide sufficient documentary support or may submit defective documents. In such a case, there may be a legitimate question as to whether the taxpayer has sufficiently established its entitlement to the input VAT.

That is different from a refund claim being denied because it was filed prematurely or beyond the prescribed period.

Take a taxpayer with legitimate input VAT arising from actual purchases and attributable to zero-rated sales. The taxpayer files a refund claim, but the claim is denied because it was filed prematurely.

The denial does not necessarily mean that the taxpayer did not have the input VAT. The problem was with the timing of the refund claim.

The same issue arises when a refund claim is filed out of time. The taxpayer may have lost the right to recover the amount through a refund, but that does not necessarily mean that the underlying input VAT was never valid.

This distinction is important. When the taxpayer filed the refund claim, the input VAT was removed from the unutilized input VAT balance precisely because the taxpayer was pursuing a refund. If the refund is later denied for a reason that does not invalidate the underlying input VAT, why should the amount permanently disappear from the VAT system?

The present BIR rules do not provide an answer favorable to the taxpayer.

Perhaps the rules should be changed.

There should be a mechanism allowing a taxpayer, subject to appropriate safeguards, to return a denied refund claim to its unutilized input VAT when the denial is based solely on timing or another procedural ground and does not establish that the underlying input VAT is invalid.

The taxpayer should prove that the input VAT actually exists, is properly supported, has not previously been utilized or recovered, and that reinstating it will not result in double recovery.

The situation should be different when the refund is denied because the taxpayer failed to establish the underlying input VAT. A taxpayer should not be allowed to use reinstatement as a second opportunity to claim an input tax that it could not substantiate.

This approach would strike a better balance. It would protect the government from unsupported claims while preventing legitimate input VAT from simply disappearing because a taxpayer pursued a refund that was later denied on procedural grounds.

The income tax treatment presents a separate issue.

While the BIR currently does not recognize the denied refund as a deductible expense, the CTA En Banc decision mentioned above provides a reasonable basis for treating the amount as a loss where the taxpayer has suffered an actual and final economic loss.

Whether a taxpayer should take this position will depend on the legal authorities, the circumstances of the denial and its tolerance for an audit challenge.

Ultimately, this is not simply a question of whether a taxpayer should be given another tax benefit.

It is a question of what should happen to legitimate input VAT after the refund mechanism fails.

If the underlying input VAT was never valid, there is no reason to return it to the taxpayer’s VAT return. But if the input VAT was valid and the refund was denied only because the claim was filed prematurely or beyond the prescribed period, permanently eliminating the input VAT may be difficult to justify.

The BIR circulars do not presently provide a mechanism for this.

To be fair to taxpayers, the law, or even a revenue issuance, should consider providing one.

A refund claim may be denied. But that should not automatically mean that the underlying input VAT disappears with it.

The author is a senior partner of Du-Baladad and Associates Law Offices (BDB Law) (www.bdblaw.com.ph).

The article is for general information only and is not intended, nor should be construed as a substitute for tax, legal, or financial advice on any specific matter. Applicability of this article to any actual or particular tax or legal issue should be supported, therefore, by a professional study or advice. If you have any comments or questions concerning the article, you may e-mail the author at irwin.c.nideajr@bdblaw.com.ph or call 8403-2001 local 330.