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Wednesday, November 09, 2005
Council airs RVAT concerns
By Danilo V. Adorador III
TAXING a fragile economy might just defeat the original intention of Value Added Tax (VAT), which had seen its inception in 1988 to combat the country's burgeoning debts.
This and other concerns were aired by Cagayan de Oro councilors, after listening to the Bureau of Internal Revenue (BIR) regional director during the regular session Monday.
BIR 10 regional director Leonardo Sacamos was invited during the City Council session to brief local legislators on the newly implemented Reformed Value Added Tax (R-VAT).
Councilors Ian Mark Nacaya and Jose Benjamin Benaldo voiced apprehension on R-VAT's effect on electricity to lifeline consumers.
Power rates projection in Cagayan de Oro at 22 centavos and reportedly the highest in Mindanao, was again a subject of Benaldo's rant.
The Finance department according to Benaldo has a higher projection for the city at 25 centavos.
Unbundling the electric rate components, Nacaya said residential consumers are taxed more than 10 percent since generation, transmission, distribution, and supply charges are separately levied by R-VAT.
Sacamos, however, allayed these fears saying R-VAT impact on the power industry comes along with certain mitigating measures.
Electric rates would not be as high as projected since the government franchise tax paid by power companies was already scrapped with the coming of the new tax law, he said.
But efficiency on tax collections were challenged by Councilors Alvin Calingin and Majority Floor Leader Edgar Cabanlas saying this could hurt R-VAT's implementation.
Cabanlas said the original intention of Vat when it was implemented during former Corazon Aquino's administration was to boost the debt-servicing capability of the country.
But imposing R-VAT on a weak economy, he said, might stifle consumption and lead to poor tax collections.
"The rule is you consume more and the government collects more. But if the people consumes less, what taxes do you have?" asked Cabanlas.
He also noted that for over 15 years of Vat's existence, it has so far failed to curb the country's foreign obligations.
"With the continuing poor performance in tax collections, we may expect a 20 percent VAT in 2020," Cabanlas said.
Meanwhile, Calingin attributed poor tax collections to unscrupulous businessmen who refuse to pay the correct taxes.
"We, the ordinary consumers pay the right taxes. But does its reach the treasury? What if businessmen chose not to remit the taxes collected from us?" Calingin noted.
Both councilors are calling for a more transparent and organized tax collection system.
Meantime, Cagayan de Oro Chamber of Commerce (Oro Chamber) president Ruben Vegafria has called on the Department of Trade and Industry to intensify monitoring of prices in the markets.
Vegafria earlier nixed calls for a legislated wage increase saying this would ultimately more do harm than good to small and medium business and average consumers.
(November 9, 2005 issue)
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