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Tuesday, July 05, 2005
Traders: Scrap cap on input tax, or we won’t support e-VAT law
The Cebu Chamber of Commerce and Industry (CCCI) is taking advantage of the delay in the implementation of Republic Act 9337 or the Expanded Value-added Tax (e-VAT) Act of 2005 to lobby against a stipulation of the law placing a 70 percent cap on the input VAT credits.
CCCI president Robert Go said the chamber has written a position paper, addressed to President Gloria Arroyo, that seeks to scrap the 70 percent cap and to retain the 100 percent input tax credits for the VAT.
“We (CCCI) will endorse the e-VAT only if the provision on the 70 percent input tax will be scrapped,” he told Sun.Star Cebu.
During a consultation on the e-VAT with the Cebu business community over the weekend, Bureau of Internal Revenue Commissioner Guillermo Parayno said Congress may increase the cap to 90 percent to give in to the demand of companies, especially the small and medium enterprises (SMEs).
But Go said even a 90 percent cap on input VAT credits is not enough and will result in the closure of businesses with low margins, like the supermarkets.
In its position paper sent to Sun.Star Cebu yesterday, the CCCI said some companies earn as low as one percent of the retail price of the goods they sell.
It also gave the example of companies selling cement, steel bars, roofing materials and paint, which the group said sell at a loss, just break even or earn only a two to four percent gross profit if they are fortunate.
It also cited gasoline stations, which it said place only a three percent mark-up on their purchases from petroleum companies.
In the past, companies could deduct from their output VAT the total amount of their input VAT.
Absorb
Input tax refers to the VAT due on or paid by a VAT-registered person or entity on importation of goods or local purchases of goods, properties or services, including lease or use of properties, in the course of trade or business.
With the new e-VAT law placing a cap of 70 percent on the input VAT that companies can claim as credits, business would be forced to either absorb the cost of the VAT or pass it on to consumers in the form of higher prices.
During the consultation, BIR Large Taxpayers’ Division Officer-in-Charge Kim Jacinto-Henares said the government purposely placed a cap on the input tax to ensure that businesses will be able to pay the government the VAT
“Sometimes, businesses won’t have to pay the VAT anymore because their input tax is greater than their output tax,” she said.
However, in its position paper, the CCCI yesterday explained that the input tax may exceed the output tax in the following cases: capital expenditures made for starting a new business, expansion of business, increase in inventory levels for sale, businesses operating at a loss (resorted to for products being introduced in the market), companies selling at a minimum profit while inventory levels continue to increase, changes in marketing or operating strategies, and input for sales to entities are “entitled to zero-rated (VAT) sales.”
The position paper was signed by Go, Jay Yuvallos, president of the Cebu Furniture Industries Foundation Inc., Janet Chua, president of Fame Foundation Philippines Inc., and the Philippine Chamber of Commerce and Industry’s Carlos Co, vice president-Visayas, and Jose Ng, regional governor-Visayas on behalf of “the Cebu business community.”
Last Friday, the Supreme Court issued a temporary restraining order on RA 9337, deferring the implementation of the e-VAT, following a petition by groups questioning the legality of the law. (JBN/CTL)
(July 5, 2005 issue)
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