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Thursday, October 20, 2005
CCCI backs RVAT but airs concern for SMEs
By
Jessica B. Natad
Sun.Star Staff Reporter
Even if members of the Cebu Chamber of Commerce and Industry (CCCI) have varied sentiments on the reformed value-added tax (RVAT), the organization can do nothing but support the implementation of the tax measure for the good of the entire country.
“Even if this is cliché, the RVAT is a bitter pill that we have to swallow. As a responsible chamber, we have to support the tax law because this would help the country,” CCCI president Robert Go said. “The RVAT is better than an economic collapse.”
TRO
The Supreme Court has lifted the temporary restraining order (TRO) on the implementation of the RVAT after upholding its constitutionality.
The RVAT (previously called EVAT or expanded value-added tax) took effect on July 1, but the High Court imposed a TRO hours later after petroleum dealers and opposition lawmakers argued that it was illegal because it empowers the President, not Congress, to implement the tax.
Go told Sun.Star Cebu that the lifting of the TRO would help improve investors’ confidence, which has dwindled due to the political crisis, among other factors.
But the chamber’s decision may not represent the sentiment of the entire business community, especially traders and small and medium enterprises (SMEs), which will be affected by some provisions of the RVAT, such as the 70 percent cap on input taxes, he said.
Input tax
The RVAT law placed a 70-percent cap on input tax, which can be deducted by companies.
This means, companies can deduct only 70 percent of the VAT they had paid in the purchase of raw materials on the cost of their products.
Go said most traders have an average profit margin of two to three percent.
If the 70-percent cap would be implemented, the traders would have to absorb three to four percent of the VAT as part of their operational costs.
This three to four percent is bigger than their current margins, said Go.
Close shop
“The result would either be that they close shop or they pass on the additional cost to the consumers. In both cases, the country’s economy would be affected,” he said.
Go said business chambers all over the country, including the CCCI, had raised this matter to the government.
“The economic team (of the government) has promised that they would address this issue, but their promise remains to be seen (in) the implementing rules and regulations of the law,” he said.
(October 20, 2005 issue)
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