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Friday, January 28, 2005
House okays VAT hike from 10% to 12%
By Jonathan F. Fernandez
MANILA -- The House of Representatives approved Thursday a proposed two percent increase in Value-Added Tax (VAT) rates from 10 to 12 percent.
With 126 congressmen voting in favor of the proposal and 11 against, the Lower House, after nine hours of deliberations, passed on third and final reading House Bill (HB) 3555 imposing an increase in the VAT at 3:45 a.m. Thursday.
The expanded VAT bill will be transmitted Thursday afternoon to the Senate for consolidation of its version of the proposal.
President Arroyo promptly thanked the congressmen for passing the VAT bill, one of her eight priority tax measures, despite stiff resistance and a walkout by minority legislators Wednesday night.
House Speaker Jose de Venecia said HB 3555 or the VAT Restructuring Act would boost government's efforts to pursue fiscal stability and fresh domestic funds for the country's developmental project.
De Venecia said "increasing the VAT rate now could be the most crucial move needed by our country in preventing the financial crisis."
He said the VAT rate hike is expected to provide an additional P34.9 billion in government revenues.
He commended the House committee on ways and means chaired by Representative Jesli Lapus and the bill's sponsors for the urgent passage of the measure.
Prior to the bill's approval, lawmakers crossed party lines in support of the VAT measure during a tedious session presided over by Deputy Speaker Raul del Mar.
At least 40 opposition and militant congressmen walked out at around 10:30 p.m. after failing in their bid to have the bill recommitted to the committee, but the House maintained a quorum, which was needed to approve the measure certified by Malacañang as urgent.
Sorsogon Representative Francis Escudero said they protested the "obvious collusion" between majority congressmen and Malacañang to pass the bill fast.
Escudero and other anti-VAT hike congressmen joined protesters outside the Batasang Pambansa in ripping copies of the bill.
He said they would ask for a revote on Monday.
Those who voted in favor of the bill cited national interest above partisan and parochial concerns, arguing that Filipinos, especially the poor, could suffer more if the government failed to address the burgeoning budget deficit and fiscal crisis.
While those against, including four administration congressmen, insisted that the VAT hike would just be an additional burden on the Filipino people, especially the poor.
President Arroyo, in a January 7 message to de Venecia and Senate President Franklin Drilon, certified HB 3555 to necessitate the immediate passage of the measure.
Approval of the measure, the President said, is intended to frontally "meet the public emergency arising from the urgent need to introduce appropriate revisions in the VAT system in line with the government's pursuit of fiscal stability and to generate fresh domestic funds for the country's development programs and projects."
The bill is the sixth revenue measure approved by the House in three months.
Pro-VAT hike congressmen believe that it could yield revenues that would help government reach its P80 billion target to turn around the economy.
Apart from the two percent VAT hike, the House also approved the bills on raising excise taxes on "sin" products, lateral attrition, tax amnesty, fiscal incentives, and a bill extending the Philippine Amusement and Gaming Corporations (Pagcor) franchise by 25 years.
In Malacañang, President Arroyo thanked the House of Representatives for working overnight to pass the expanded VAT bill and described the approval as "an act of valiant civic duty that build a better future for all Filipinos by growing the economy to create more jobs and push our 10-point pro-poor agenda."
Arroyo said the economy is on a roll and government will ensure that it will shield the "most marginal sectors" from rising prices.
Press Secretary and presidential spokesman Ignacio Bunye assured that mass-consumption items will not be affected by the VAT.
Incoming Trade Secretary Juan Santos said in an ambush interview in Malacañang that his department will cushion the effect of the VAT by concentrating on productivity and efficiency.
"If there are going to be less losses, if the logistics are going to be improved, then I think the impact of that will be softened," he said.
Santos said the strengthening peso will also have a positive effect on prices, particularly for those who are manufacturing imported components.
Drilon, meanwhile, said the Senate would work double time to expedite the passage of the expanded VAT bill as the Senate ways and means committee has assured it would be approved by March 18.
He, however, said the Senate would be more cautious in passing the bill because they don't want the poor to be adversely affected.
Drilon said he is in favor of expanding the scope of VAT but it should not include basic necessities like noodles, milk, infant formula, sardines and other necessities because these are the common food of the poor.
"We want the VAT be more effective but we do not want the poor people to suffer from this bill," Drilon added.
He urged all sectors of government to unite to come up with a better law that would solve the fiscal crisis.
A colleague of Drilon, Senator Miriam Defensor-Santiago, said if the VAT is imposed on power generation companies, it should be absorbed by the companies and not passed on to end-users.
She warned incoming Energy Secretary Rafael Lotilla that his confirmation by the Commission on Appointments (CA) would be blocked if the power generation companies pass the tax on to the consumer.
"If the new energy secretary could not make any measure, the best effort I can do is to block his nomination in the CA," Santiago said.
On the other hand, Senators Joker Arroyo and Juan Ponce Enrile have already expressed opposition to the VAT bill and said they will block its passage in the Senate.
Senator Ralph Recto, for his part, is pushing for variable rates instead of a uniform 12 percent increase. (With reports from JMR/JPM)
(January 28, 2005 issue)
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