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Tuesday, June 10, 2003
10% VAT on financial sector has little effect on lending
THE 10 percent additional value added tax (VAT) imposed by the Bureau of Internal Revenue (BIR) recently has not resulted to a slowdown in lending transactions, as far as government financial sectors are concerned.
Using their experience as a basis, Small Business Guarantee Fund Corporation (SBGFC) Manager for Mindanao Alex Bataller said the total amount of loan released by the institution has, on the contrary, increased this year compared to last year.
For the first five months of 2003, a total of P62 million has been released. Last year's figures, however, are still being finalized, Bataller said, and estimated that 2002's released credit amount was lower by about 20 percent.
The business sector is not at all that bad. An increase in lending transactions may prove that enterprise opportunities still thrive even with the present situation, he said.
Bataller mentioned that although an added cost for the borrowers, the 10 percent VAT is insignificant compared to the profit margin expected by the borrowers who are engaged in various businesses.
"Of course meron talagang ibang businesses na hindi kaya ang 10 percent (VAT), but if you consider the profit, kahit may dagdag na VAT, liliit ang bottomline," Bataller noted.
If a borrower intends to borrow P1 million from any financial institution, he shall pay additional 10 percent of the interest, regardless of the payment scheme, Bataller explained.
Thus, if the bank previously imposed a 10 percent interest for a P1 million loan, the borrower is now mandated to pay additional 10 percent of the 10 percent interest of the total credit.
"So if you owe a bank P1 million, and it imposes a 10 percent interest per annum, you have to pay P1.1 million for the year. With the new law, you will have to pay another P10,000 for the VAT," the SBGFC manager clarified.
Heavy borrowers do feel the effect of the VAT imposition, Battaler noted.
Instead, individual clients who regularly engage in deposit, withdrawal, and other transactions are the ones badly hit by the implementation. CEU
(June 10, 2003 issue)
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