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Friday, February 18, 2005
Mayors rap VAT; Arroyo woos Cebu
CEBU CITY -- President Gloria Macapagal-Arroyo called on Cebuanos, whose votes helped reelect her last year, to support her administration's revenue-raising measures, like the increase in value-added taxes (VAT).
But she'll have to convince Cebu's mayors, whose league unanimously passed Thursday a resolution opposing the VAT increase approved by the House of Representatives.
"We have to raise revenues so we can stop borrowing and borrowing all the time to finance our development," President Arroyo said. "We cannot forever attend to our development by borrowing, because the interest alone eats up what we should be using for services and infrastructure."
The President made the call during a press conference in Lapu-Lapu City Thursday, when she was told about the clamor of some Cebu provincial officials for her and Congress to reconsider the VAT rate increase from 10 to 12 percent.
"Cebu is one of the biggest beneficiaries of our infrastructure program," Arroyo said.
Five of seven Cebuano lawmakers voted for the increase, while Cebu City Mayor Tomas Osmeña plans to veto a City Council resolution opposing the VAT rate hike.
Listening
But among the public, support for the increase is scarce. A new alliance called KomVATi has been formed to oppose the tax hike, and Valentine's Day gave several groups a chance to protest a higher VAT rate.
President Arroyo denied that her administration is not listening to public opinion about the VAT increase, saying that Senator Ralph Recto has sought the views of about 60 individuals and entities for a report.
More hearings will be conducted by the government, Arroyo said.
Without waiting for such a hearing, the League of Municipalities of the Philippines (LMP), in its general assembly Thursday, asked the administration to remove some VAT exemptions and improve tax collection efficiency.
The LMP warned that consumers will bear the burden of the increase.
They also pointed out that while government claims that increasing VAT will mean P34 billion in additional revenues, they found out that P353 billion was lost due to tax collection inefficiency.
They cited data from 1998 to 2003 of the National Tax Research Center and the Department of Finance (DOF).
In 2003 alone, DOF data showed that tax leaks caused the government to lose P144 billion, the mayors cited.
"If the government expects to earn P34 billion more from the increase in VAT, increasing its tax collection efficiency with the present VAT would more than suffice to address the fiscal requirements of the government," LMP president Ronald Allan Cesante told the group.
Exemptions
The league also gathered data that Congress has allowed export firms and those under investment priority areas to avail themselves of various VAT exemptions and privileges that amounted to P195.5 billion in 2003.
That year, the budget deficit was pegged at P199.9 billion.
The mayors suggested that instead of imposing an additional tax burden, government should consider increasing tax collection efficiency, removing or reducing exemptions and imposing an across-the-board import surcharge, as imported goods smuggled into the country are not taxed.
Late last month, the Lower House approved the two percent VAT increase. Five of seven representatives from Cebu voted in favor of it.
Since then, several groups, including the Cebu Provincial Board, have expressed opposition to the increase.
But as "there's no gain if there's no pain," President Arroyo said: "It's better to suffer something now that is within our control than to postpone it."
Poor forever
Her administration needs P80 billion to fund critical projects, some of which will be implemented in Cebu. Without new revenues, the Philippines "will be a poor country forever."
"So, I ask the people of Cebu to join me, to join our legislators, and to unite in the things that we have to do in order to sustain development," President Arroyo said.
The Cebu City Government gave President Arroyo last night a plaque of gratitude, as she winded up her one-day visit to Cebu in a dinner at Malacañang sa Sugbo.
"None of us can forget the wonderful honor you bestowed upon Cebu by defying the tradition of inauguration," Mayor Tomas Osmeña said as he handed the plaque.
Breaking away from tradition, President Arroyo delivered her inaugural speech last year in Cebu, where her margin of about one million votes over Fernando Poe Jr. helped her win the election.
In a short speech, Arroyo thanked the Cebuanos for the support she earned in the presidential race.
Whether that support can be translated into support for the VAT increase remains to be seen. (With AIV)
(February 18, 2005 issue)
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