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Saturday, November 19, 2005
Internal revenue explains expanded VAT
LAGAWE, Ifugao -- An official of the Bureau of Internal Revenue (BIR) said Friday the expanded value-added tax (VAT) is "not at all too evil or anti-poor contrary to the misconception and restiveness of many people but can be abused by enterprising and unscrupulous businessmen."
Provincial Revenue District Officer Elena Rillera, during a tax forum at the Lagawe Central School Conference Hall, said expanded VAT is one of the components of the government's fiscal program to put the country back in track in its economic reform agenda.
Rillera said e-VAT is not an additional tax on existing goods and services already under VAT but a measure to also impose a 10 percent VAT on other goods and services not previously covered by the old VAT law.
The new VAT law will also include VAT on petroleum products, toll and road operation, Philippine Amusement and Gaming Corporation (Pagcor) and its licensees and franchises, sale of electricity by generation, transmission and distribution of companies, sale of electric cooperatives as well as importation of machines and equipment including spare parts and goods and services pertaining to transport from one place to another in the country.
Basic foods such as rice, canned goods, milk, meat, fish, vegetables and other basic commodities are still not subjected to e-VAT.
"This is the first time that petroleum products will be subjected to e-VAT as this is also a way to motivate the public on the efficient and responsible use of petroleum products because its increasing price," said the BIR officer.
Rillera said prices of petroleum products are expected to increase slightly but the burden of high price will be borne by consumers depending on their level of consumption. This why e-VAT is not anti-poor because it is a "consumption" tax, she said.
She explained that those who consume more petroleum are taxed more.
Data from the National Statistics Coordinating Board (NSCB) revealed that 30 percent of the high-income group consumes 65.4 percent of the petroleum supply while the bottom 30 percent consumes only 7.5 percent.
The same data also shows that two percent of the total income of the high-income group is spent on petroleum compared to the low-income group which spends only 1.4 percent.
Rillera said reforming the VAT system will help generate additional revenue for the government to finance other basic services such as improved health care, betted education, expanded electricity, quality roads, bridges and other basic infrastructures for the people.
The new tax law, she added, was conceived to increase government revenue because in 2004, about 85 percent of the government revenue was used for servicing debts and only about 11 percent was allocated to infrastructure and other capital expenditures.
She said aside from additional revenue, another benefit of taxing petroleum is that it will help regulate or lessen the demand for it, which is good for the economy as the country is prepared to benefit from foreign exchange savings as a result of oil import. "It is also good for the environment because less consumption of petroleum means lesser pollution and improved health for our people," she also said. (DC)
(November 19, 2005 issue)
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