60-month amortization of input tax on capital goods purchased, imported

In ABAKADA v. Purisma, petitioners contest as arbitrary, oppressive, excessive and confiscatory, Section 8 of R.A. No. 9337, amending Section 110(A) of the NIRC. Said provision imposes a 60-month period within which to amortize the creditable input tax on purchase or importation of capital goods with acquisition cost of P1 Million pesos, exclusive of the VAT component.

With respect to Section 8, amending Sec. 110(A) of the Tax Code, which provides for 60-month amortization of the input tax on capital goods purchased or imported, it is NOT oppressive, arbitrary, and confiscatory. The taxpayer is not permanently deprived of his privilege to credit the input tax. For whatever the purpose is, it involves executive economic policy and legislative wisdom with which the Supreme Court cannot intervene. (G.R. No. 168056. September 01, 2005)It is worth mentioning that Congress admitted that the spread-out of the creditable input tax in this case amounts to a 4-year interest-free loan to the government. In the same breath, Congress also justified its move by saying that the provision was designed to raise an annual revenue of 22.6 billion.

The legislature also dispelled the fear that the provision will fend off foreign investments, saying that foreign investors have other tax incentives provided by law, and citing the case of China, where despite a 17.5% non-creditable VAT, foreign investments were not deterred.

Again, for whatever is the purpose of the 60-month amortization, this involves executive economic policy and legislative wisdom in which the Court cannot intervene. (G.R. No. 168056. September 01, 2005)

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