Tuesday , April 24, 2018

Senator proposes lowering VAT rates

SENATOR Risa Hontiveros warned that the proposed Tax Reform for Acceleration and Inclusion Act (Train) could render 1.7 million "near poor" wage earners even poorer, as she called on government to lower the Value Added Tax (VAT) from 12 percent to 10 percent.

Hontiveros said that taxation is not bad as long as it benefits the majority of the people, but she stressed that any proposed taxation that takes a larger percentage of income from low-income earners than from high-income earners is unjust and discriminatory.

She said that she will propose the necessary amendments to the tax proposal to make it more responsive to the interests of poor Filipino families.

Hontiveros said the Department of Finance's (DOF) own "micro-simulation methodology," show that while poverty will be marginally reduced as a result of the P200 per month income transfer as provided by TRAIN, there are 1,796,730 near poor wage earners which would likely become even poorer.

"Millions of near-poor people risk becoming poorer," Hontiveros said.

Hontiveros said that the actual households' families' size is bigger compared to the DOF's assumed typical household size in its computations, Hontiveros said.

Also, it is bigger compared to its sample of 5,000 households in each income grade, and because the National Housing Targeting System (NHTS) methodology is unable to identify 13 percent of the poor.

The senator urged the finance department to use the entire set of 50,000 households interviewed in the 2015 Family Income Expenditure Survey (FIES)-Labor Force Survey (LFS) and compute the combined tax and income transfer effect for each of these households.

Hontiveros also said that the monthly transfers need to be made available for a longer period of time corresponding to the phased implementation of fuel excise tax increases.

She also proposed to reduce the country's VAT from 12 percent to 10 percent, and then to 8 percent to align it with the Association of South East Asian Nations (Asean), once VAT revenues reach 4.2 percent of Gross Domestic Product (GDP).

Hontiveros said Thailand is able to collect VAT revenues of 4.2 percent of GDP with a 7 percent VAT rate. (SunStar Philippines)