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Tuesday, July 05, 2005
Gov't asks Supreme Court to lift restraining order v. e-VAT
* RP losing P150M to P160 for every day of delay in E-VAT implementation: finance
CLAIMING that government stands to lose millions of pesos in revenues every day that the expanded value-added tax (EVAT) is not collected, the Department of Finance (DOF) Monday filed a motion at the Supreme Court (SC) to lift the temporary restraining order it issued early Friday night, or hours after the law came in effect.
Voting 13-2, the SC earlier issued an indefinite injunction on Republic Act (RA) 9337, which imposes a VAT on certain commodities such as fuel, power, non-agricultural products and services rendered by doctors and lawyers.
The petition for prohibition was filed by the House minority bloc led by Sorsogon Representative Francis Escudero; petroleum dealers associations from Petron, Caltex and Shell; and party-list group Abakada-Guro. Named respondents were Executive Secretary Eduardo Ermita, Finance Secretary Cesar Purisima and Bureau of Internal Revenue Commissioner Guillermo Parayno Jr.
In a 50-paged urgent motion, government through Solicitor General Alfredo Benipayo also asked the SC to require the petitioners to file a bond equivalent to P130 million per day representing the amount that government should have earned with the implementation of RA 9337 or the E-VAT law, until the final resolution of the case.
Government lawyers said the suspension of the implementation of the law, albeit temporarily, endangers the country's fiscal capability such that government would not be able to bring down the country's budget deficit from P187 billion to P160 billion at the end of the year. They said from July 1 until December 30, 2005, government could earn incremental revenues amounting to P25 billion to 28 billion.
With the E-VAT law in place, the government hoped to wipe out the entire budget shortfall to zero by 2008 if it could earn P130 million in revenues per day.
Benipayo, in the government's motion, quoted the dissenting opinion of Chief Justice Hilario Davide Jr. and Associate Justice Reynaldo Puno against the issuance of a TRO, that "the collection of taxes cannot be enjoined, being the lifeblood of the nation."
They cited various SC rulings affirming the validity of a statute prohibiting the injunction of tax collection.
Other than Section 9 of RA 9282, expanding the jurisdiction of the Court of Tax Appeals (CTA), the government said there is no statute that allows an injunction to be issued against the collection of taxes and that when CTA exercises this power, the taxpayer is required to file a deposit or surety bond for not more than double the amount.
They further dismissed as mere allegations of unconstitutionality cited by the complainants.
"Laws are presumed to be valid unless and until the courts declare the contrary in clear and unequivocal terms," Benipayo said.
Government further said irreparable damage claimed by petitioners once the law is enforced is puny when compared with the injury it would cause government and the people with the suspension of RA 9337.
It further claimed that oil dealers could not claim that they would be operating at a loss because "the amendments introduced in the new VAT law allow the taxpayer to utilize the input VAT, whether on a deferred basis or amortized for over a period of time, in effect reducing his taxable income."
In the event that RA 9337 is invalidated, government said taxpayers wanting to recover their paid taxes, may apply for tax credit or a refund.
Purisima said if the SC decided to issue a permanent injunction on the new VAT law, the government has no recourse but to double its efforts against tax evaders and smugglers as well as put more discipline in managing expenditures.
"We believe that maintaining the TRO will inflict greater damage to the republic than what petitioners will sustain were the implementation of the law not restrained. Delays would derail, if not endanger, our fiscal consolidation efforts to bring down our budget deficit," he said.
Meanwhile, Finance Secretary Cesar Purisima said the longer the TRO on the implementation of the E-VAT Law is in effect, the greater the risk that the Philippines would again end up in an economic crisis.
Purisima said the government stands to lose P150 million to P160 million every day that the E-VAT is not imposed or about P4 billion to P5 billion a month.
He said if the issue drags on, there is a "possibility we will have to adjust our numbers, but we will definitely work doubly hard so as not to have an impact on our fiscal consolidation."
He added that the Philippines could not keep on borrowing as the interest alone eats up a chunk of the national budget which could have been used for the country's needs like infrastructure programs the delivery of basic services.
Purisima dismissed that the administration had agreed to the delay the implementation of the E-VAT to ease the political tension and attacks on
President Gloria Macapagal-Arroyo.
"I'm the finance secretary, so I don't know anything about politics. All I know about is collecting taxes and running after smugglers and putting discipline in government owned corporations and that's what we're going to continue to do. There is no politics to taxes and collecting of duties," he said.
He added that the E-VAT is an important aspect in the economic reform agenda of the President "and without it I think we will not be able to deliver the promises that are necessary to improve the competitiveness of the county."
He also shrugged off reports that he might quit his post unless the TRO is lifted. "I'm focused on collecting taxes, running after tax evaders and we will not cease, we will not stop doing that. The important thing is the finance department is focused on making sure that we address the deficit problem of the government and we will do our best to make sure that we hit our targets especially in the areas of fiscal."
Newly-installed Bangko Sentral ng Pilipines (BSP) Governor Amado Tetangco Jr. said the market is monitoring what's going to happen on the VAT and the TRO issued by the SC.
Tetangco said the passage of the VAT has been a source of optimism as it showed that the Philippines is on its way of addressing the fiscal deficit problem in a decisive way.
He said there has been an improvement in market sentiments since discussions on the law started "and then it further improved when the law was finally passed."
"Now hopefully, we will quickly find a resolution to this particular issue and it is important for the market, investors, analysts and credit rating agencies that the government demonstrate its commitment to decisively reduce the fiscal deficit and stick to its fiscal consolidation program and the E-VAT will help us in this direction, we really need to demonstrate that we are serious about tackling the fiscal deficit issue," he added.
Tetangco, who took his oath before President Arroyo in Malacañang Monday as new
BSP governor and Monetary Board chairman, turned over a P1.6 billion check to the National Treasury as the BSP's contribution to the fiscal consolidation program. Tetangco turned over the check to National Treasurer Omar Cruz, which was witnessed by Arroyo and Purisima.
Tetangco said despite the present challenges, the macroeconomic situation has remained generally stable and the banking sector remained generally sound.
He said as the new governor and chairman, he is committed to do his best to maintain the stable prices and sound banking system that his predecessor Rafael Buenaventura started.
"The BSP had another year of profitable operations in 2004, earning P2.1 billion during the year. Today, Madame President, we are remitting the usual 75 percent of this net profit to the National Treasury," said Tetangco.
He added that the latest remittance brings the BSP's dividend payments for the past 12 years to a total of P58.9 billion. This is in addition to the P32.1 billion worth of taxes that the BSP paid up after their exemption expired in 1999. (ECV/JMR)
(July 5, 2005 issue)
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