Just because I retired and moved to the Philippines doesn’t mean I’ve escaped taxes. Not at all. In fact I’ll be looking into filing my taxes to IRS within the next couple of weeks. But those are US federal taxes, what about local taxes? Surely I’ve gotten relief from those. No, not those either.

The Philippines, like the US, has a lot of taxes. I couldn’t even begin to compare which has the most, but it appears that nearly all of the similar taxes are lower here in the Philippines, with one big exception. That being the VAT (Value Added Tax) that is applied to all goods I buy here. The VAT is set at 12%, and if I were to compare it to the state sales tax I paid in Spokane, WA, it’s about 3% higher (8.7% in Spokane, as it varied by city).

I don’t believe the VAT and the local sales tax back in WA are a direct comparison, but it is the closest that I’ve come up with. For instance, we did not have to pay the sales tax in Spokane for food that we bought in the grocery store. If eating at a restaurant, then we did. It seems that everything is taxed here. Maybe there are items that are not, but to my knowledge I’ve not encountered them yet.

Value-Added Tax is a form of sales tax. It is a tax on consumption levied on the sale, barter, exchange or lease of goods or properties and services in the Philippines and on importation of goods into the Philippines. It is an indirect tax, which may be shifted or passed on to the buyer, transferee or lessee of goods, properties or services. – BIR

The one thing I really appreciate about the VAT is that it is always included in the price. The price you see is the price you pay. There’s none of this game playing as with the local Spokane taxes. I would have no idea how much my final bill would be back there, especially if I went to a store that had taxable and non-taxable items. There was even confusion as to which items were considered food, as I would sometimes pay tax on that item at one establishment, but not at another.

Here it is much more cut and dry. I’m not excited by the fact that I’m paying 12% tax on everything, but it is really nice to know what the final cost is before going to the register.

Another other fee that I’ve seen added at some restaurants is a service charge. The two occasions that I’ve noticed this were at a Pizza Hut and a Shakey’s. I can’t recall if it was 10% or 15%, but I was quite surprised in both cases, as I had no indication that they would apply an additional fee. I don’t always leave a tip here in the Philippines, as it is not expected. I do so only when I’ve had full service and I was happy with the food and service. To me that makes a lot more sense then the “required” tip in America. I don’t appreciate the automatic added service charge I’ve experienced here, and will attempt to avoid those businesses that use it.

I understand there are some special exceptions to the VAT, for example at cockpits, but for the most part the 12% is accurate. There are also community taxes, excise taxes, property taxes, etc., but the VAT is the one that you would encounter most commonly on a day to day basis.

I often need to remind myself of this inclusion when comparing an item with something back in Spokane. With the tax already included in the price, it can make a big difference at times.

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