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Saturday, September 03, 2005
Finance dept. nixes move to defer e-VAT
Consumers should brace for the inevitable—higher prices of basic goods and services—as the Department of Finance (DOF) is not sympathetic to moves to defer the implementation of the expanded value-added tax (e-VAT) law.
“It’s a bitter pill (to swallow), but it’s necessary. We need to increase our revenues,” said Finance Secretary Margarito Teves in an interview over the ANC Network yesterday.
Last Thursday, the Supreme Court upheld the constitutionality of the e-VAT law, which lifts VAT exemptions on fuel, power, non-food agricultural products and services rendered by doctors and lawyers, among others. Opponents have 15 days to lodge an appeal.
TRO
The e-VAT law, signed by President Arroyo in May, was supposed to have been implemented last July 1. But on the same day, the Supreme Court issued a temporary restraining order (TRO) following a petition by groups, including oil firms, questioning the legality of the law.
The Bureau of Internal Revenue (BIR) said it expects to increase collection by about P5 million a month nationwide once the e-VAT is implemented.
“We initially expected to collect P60 to P80 million from July to December this year,” BIR 13 taxpayers’ assistance unit chief Zorah dela Cruz told Sun.Star.
News reports yesterday said Rep. Joey Salceda, one of the economic advisers of Arroyo, would file a resolution in Congress to defer the implementation of the e-VAT on power and fuel.
Salceda expressed concern at the timing of the implementation, coming as it does at a time of record-high world oil prices. Oil prices have breached the $70-to-a barrel level.
But the DOF is not budging.
“We sympathize with Congressman Salceda’s concern. Congress has the prerogative to defer the implementation of the e-VAT. But at this point, we’d rather implement what the law suggests. As soon as the Supreme Court lifts the TRO, we’ll implement it,” Teves said.
As regards the controversial 70 percent cap on input VAT credits, the finance chief said that if the input tax does not exceed the output tax, then the cap will stay at 70 percent.
Scrap cap
The Cebu Chamber of Commerce and Industry, led by its president, Robert Go, had earlier asked President Arroyo to scrap the 70 percent cap and retain the 100 percent input tax credits for the VAT.
The chamber argued that with the reduction in the input VAT that companies can claim as credits, companies would be forced to either absorb the cost of the VAT, something that low-margin companies cannot afford to do, or pass it on to consumers in the form of higher prices.
Despite the delay in the implementation of the e-VAT law, the government still expects to be able to meet its P180-billion budget deficit target for this year.
The P180-billion target did not factor in the expected revenues from the e-VAT, Teves said.
However, the DOF is not expecting any kind of windfall, as rising oil prices are expected to dampen consumer spending and bite into corporate profits, which will affect tax collection.
This is why the DOF is considering other measures, aside from tax collection, so it can stay within its programmed deficit ceilings.
Gov’t shares
Teves cited the selling of the government’s shares of stock in various corporations, the disposal of assets and better monitoring of government-owned-and-controlled corporations, some of which are notorious for being loss-making affairs.
The budget deficit target for next year is P125 billion, which is about 2.2 percent of the country’s gross domestic product (GDP). GDP refers to the amount of goods and services produced by a country.
Sin tax
Asked to comment on the dismal collection of the so-called sin taxes, which amounted to only P800 million from February to July, Teves said the government had not anticipated that in the first few months of the implementation of the new excise tax rates on tobacco and alcohol products, the companies would unload their old stocks at the old prices and consumers would shift to lower-end cigarettes.
The government had expected to collect P15 billion in additional revenues from the sin taxes in the first year alone.
For next year’s budget, Teves said the DOF would have to review what might have to be amended in the excise tax and e-VAT laws. But as much as possible, the agency wants to be able to work within the implementing rules and regulations instead of going back to Congress for amendments.
Amendments
“It’s possible that we may seek amendments to either law. But we don’t want to commit until we see the numbers,” he said.
These numbers may be available in the next few days as the DOF is set to make a presentation to Congress.
In the meantime, the government official encouraged the public to cooperate on the e-VAT implementation instead of seeking amendments.
“Let’s see what happens in the next few months,” he said.
Ahead of the July 1 implementation of the e-VAT, players in sectors previously exempted from paying the VAT, such as the Aboitiz Transport System (formerly WG&A), Cebu Pacific and Veco, had said they would pass on the tax to the market.
Philippine Airlines also said it would collect a 10 percent VAT on the sale of domestic passenger tickets and cargo carriage.
Aside from lifting the VAT exemption on some sectors, the e-VAT law also gives President Arroyo the authority to raise the 10 percent VAT rate to 12 percent in 2006. It increases the corporate income tax rate to 35 percent from 32 percent as well.
Meanwhile, dela Cruz urged consumers to always ask for a receipt. The BIR has a VAT audit trail to check on those who cheat on taxes. (CTL/With ALC)
(September 3, 2005 issue)
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