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Thursday, February 03, 2005
Speak out: Realistic option
By Rep. Raul del Mar
(Taken from Deputy House Speaker Raul del Mar’s written explanation of his vote for the bill that seeks to increase the value-added tax or VAT by two percent)
I have always said – and this is an accepted wisdom – that nobody but nobody would have the heart and mind to add to the sufferings of the poor, the deliberate disposition to unduly burden the less fortunate.
It is also said that extraordinary situations that affect the nation demand extraordinary measures, including a measure of understanding and sacrifice on the part of the entire citizenry.
We now have a government that continues to raise less and less revenues and borrows more and more to finance its operations. The result – a looming fiscal crisis that now threatens the very survival of this country.
If we fail to raise the needed revenues, immediately and substantially, if we fail to have the desired fiscal cure, no matter how bitter the pill, the consequences will be far worse than what the ordinary layman can imagine.
Government essential functions will be drastically reduced. Appearing financially weak, creditors will close their credit windows and insist on debt settlement. With less sources of financing, manufacturers and other industries will be forced to close shop. Inflation will be difficult to arrest.
This will give us a financially crippled government, the sure signs of a collapsing economy. And this will hurt and hurt most only the poor because they are stuck with the economy, because they have no other recourse. The more fortunate can afford to wait for better times and the rich can even leave the country – to come back when life becomes attractive again.
Absolutely necessary
Raising revenues has become absolutely necessary. There is no other realistic option. The two percent VAT increase has become part of the condition sine qua non for survival. The impact of the two percent increase must be viewed, not in isolation, but in this light. A tax burden to be shared by many, not as significant it would seem, should yield to the most important consideration of preventing a fiscal disaster.
The revenues generated by the VAT increase will significantly help put the fiscal house in order which will benefit most the poor because this means having a government that can help its constituents, especially the poor, an economy everybody – particularly the unemployed and the low-income earner – can depend on and look up to for a better life. Put differently, this would result in enabling the government and the economy do bigger things on a sustainable basis to improve the ability to pay or taxable capacity of the poor.
The two percent increase is not as burdensome as it is pictured to be. Firstly, the VAT, as a tax on consumption, will bear more heavily on families that have a lot more to spend, the rich and high-income earners who have more income to spend for consumption. Secondly, the operation of the VAT system renders it less likely for the seller-firm, manufacturer or producer of good or merchandise to pass on the entire two percent increase to consumers. Third, the existing safety nets in our VAT law are still there.
Exempted
In substance, the existing law does not apply to businesses with a turnover of less than P550,000.00 per annum, exempts transactions involving basic and essential goods and services, sales of agricultural and fresh marine products, livestock and poultry for food consumption; most bought in public markets, carenderias and sari-sari stores are exempted from VAT; exemption of lease of residential units with monthly rental not exceeding P8,000.00, and principally taxes the consumption of high-income earners. In all, the effect of the two percent increase on the general level of prices would be minimal.
This is not to mention the exemption of the prime commodities for the poor that we intended to legislate but were not able to do so because we were not sure of getting the vote required for a tax exemption, which is the majority of all members, not merely of those present. This is a shortcoming that we shall correct in the bicameral conference committee.
Finally, let me put on record that I have always worked for the poor since the start of my congressional career. I have always voted for what is right not for what is popular.
(February 3, 2005 issue)
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