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VAT anti-poor — Bayan Muna

BAGUIO CITY (Feb 10) — “The Gloria Macapagal-Arroyo (GMA) government lied on the real impact of the 12% Value Added Tax (VAT). VAT is regressive and hits the poor the most. The 20% VAT rate hike translates to a monthly burden of P123.6 for the poor.”

This was stated by Rep.Teodoro Casiño of the party list Bayan Muna in a forum on VAT held at the Bulwagang Juan Luna at the University of the Philippines Baguio this week.

The gathering was sponsored by the National Concerns Committee-University Council of the University of the Philippines, Bayan Muna-Cordillera and Metro-Baguio Promotion of Consumers’ Survival and Economic Rights (PRO-CONSUMERS). About three hundred individuals representing different organizations and institutions attended the said affair.

The tax measure

VAT is a form of sales tax wherein goods and services are taxed on the basis of where they are consumed rather than where they are produced.

It is a tax on consumption shouldered by the final consumers, with manufacturers and sellers acting only as tax collectors.

It covers food products such as processed meat, canned fish, coconut and vegetable oil, bakery products, noodles, milk, dairy products, coffee and refined sugar. Goods and services like clothing, footwear, drugs & medicine, furniture, restaurants, cafes, employment and recruitment agencies are also covered by VAT.

The tax measure was first introduced in 1988 under the Tax Reform Program (EO 273), replacing around 61 indirect taxes on goods and services. In 1994, VAT was broadened to include more services, replacing 12 more indirect taxes.

Its coverage was amended four times – first in 1996 and second on 1998 to restore and lift certain exemptions. On its third amendment, banks were placed under the VAT with the expiration of the two-year VAT deferment for the sector but by 2004, banks were again exempted and placed again under the Gross Receipts Tax (GRT) system.

Through a VAT rate increase, the GMA government intends to collect more revenues to address its problem on the budget deficit.

This is an imposition of the International Monetary Fund (IMF), Casiño explained. The IMF has been pushing the government to increase the VAT rate as early as 1999 under its Memorandum of Economic and Financial Policies.

After an IMF-Monitoring Team visited the country last June 25- July 8, 2004 to assess the government’s fiscal situation, the IMF reportedly recommended a VAT rate increase to 15% to GMA’s economic managers.

Not the solution to the problem

Casiño mentioned that a tighter VAT administration scheme and not a VAT rate increase would help in addressing the government fiscal problem. According to a study done by the National Tax Research Center (NTRC), about P65.5-B annually is lost due to VAT leakage.

He also cited a 2004 study by the Congressional Planning and Budget Department (CPBD) which states that VAT collection could be increased without any rate adjustment. The same body earlier called on Congress to review special treatments under the VAT, including those enjoyed by Independent Power Producers (IPPs) and other favored sectors. “We agree that we should tax IPPs pero huwag VAT dahil ipapasa lang sa consumers”, Casiño said.

The solon also stated that there are other alternatives to solve the budget deficit problem like making the government tax collection more efficient. He referred to Argentina’s non-payment of foreign debts as an example worth considering. About 40 % of the Philippine government’s annual budget is allotted for foreign debt payment.

Resistance quelled in the House of Representatives

Despite strong protests in congress and from the public, the House of Representatives passed House Bill 3555 or Amendments on the VAT on third reading in the early morning of January 27, 2005. The said house bill, which is pending in the Senate, will impose a one-time increase in the VAT rate by 20% from 10% -12% once it is approved.

Another VAT bill – House Bill 3705, which is presently being deliberated in Congress, intends to lift the exemptions on power, oil, shipping, and on the professional fees for doctors and lawyers.

According to Casiño, House Bill 3555 was railroaded in Congress and Malacanang played an active role in the campaign to get the bill approved. Certain rules and policies in Congress on the passing of bills were not followed and VAT-liable sectors and consumers were not duly represented or even consulted in the hearings. This prompted the 22 representatives to walk out of the halls of congress the night before the bill was passed with a vote of 126-11.

Taxpayers’ protests

In the same forum, the Organisasyon dagiti Nakurapay nga Umili ti Syudad (ORNUS) expressed that they see this effort at tax collection as an attack against the urban poor. Daisy Bumatang, Secretary-General of ORNUS said that the VAT will only increase the oppression among the urban poor. She strongly questioned Congressman Mauricio Domogan’s vote for the bill.

Sr. Margarita Jamias of the Association of Women Religious in Baguio-Benguet called on the participants to write or call the senators to stop the bill from being passed.
When asked if there was something else the people can do to prevent the “tsunami of GMA’s taxes”, Casiño stated that, “This fight has to be taken to the streets. The hope really lies in the people outside Congress.”# Audrey Beltran with reports from Kim Quitasol for Nordis

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