Sunday, May 15, 2005

Explanation on VAT vote

Doesn’t matter if it’s the House or Senate version: VAT STAYS ANTI-POOR

Explanation of vote on the VAT bicameral report,
Anakpawis Rep. Crispin Beltran, May 11, 2005

This Representation stands firm that the bicameral conference on the value-added tax (VAT) failed to resolve the fundamental issues of VAT as neither the House nor the Senate version spares the poor from further shouldering the burden of raising revenues for the cash-strapped government.

Mr. Speaker, the Senate version does not pose a better option to the House proposal for a 12% increase in VAT. Despite the assurance of lawmakers of a "no-pass on" provision, Filipinos are still being forced to brace themselves for higher oil price and power rates as a result of the Senate-proposed reforms in the VAT.

My dear colleagues, the Senate cannot ensure a "no-pass on" clause since VAT is a consumption tax, not a producers' tax. As such, Filipino consumers, already reeling from continuous increases in oil prices and electricity bills, will be the ones to shoulder this additional cost.

The Senate version of the VAT bill retains the 10% VAT rate on goods and services, but lifts the exemptions on electricity sales by generation, transmission and distribution firms, and the importation of raw materials for the manufacture of petroleum products. To mitigate its impact on the poor, the Senate version imposes penalties on power companies that would pass-on the VAT costs, while repealing the excise tax on socially sensitive products and reducing the excise tax on gasoline.

But such assurance is meaningless by simply looking at the public's experience under a privatized power sector and a deregulated oil industry, where consumers are battered with continuously soaring electricity rates and oil prices.

Imposing a 10% VAT on oil will actually result in higher pump prices even if the excise tax were repealed or reduced. An excise tax is a fixed amount, which does not increase proportionally with the increase in pump price unlike a 10% VAT which increases in absolute figures every time the oil importation costs increase. In the end, ordinary consumers carry the burden as higher importation costs mean higher pump prices.

Moreover, while a "no pass-on" provision for the VAT on power seems to protect the ordinary people, the ultimate burden will still fall on them. It must be noted that the contracts of independent power producers exempt them from tax obligations, which Napocor shoulders. The Senate's VAT bill thus will further push Napocor and the national government to bankruptcy, further restricting its capacity to fund social services.

In the meantime, this Representation asserts that President Gloria Macapagal-Arroyo has no right to increase the value-added tax or VAT rate. The power to impose taxes is beyond the power of the executive. I question the provision on the bicameral report on taxes granting the president powers to increase VAT rate from 10 to 12 percent.

Malacanang has no right to enter any commitment regarding the preconditions set by the bicameral committee, and the pro-VAT senators and congressmen in the bicameral committee have no right to give power to the president to increase VAT rate. Since President Arroyo was catapulted into power, the country’s annual budget deficit estimates to about P200 billion which is already more than 30% of the country’s GDP in 2004.

The two preconditions set by the bicameral committee to give that particular extra power to the president are: 1.) Value-added tax collection as a percentage of gross domestic product (GDP) of the previous year exceeds 2.8 percent, and 2.) National government deficit as a percentage of GDP of the previous year exceeds 1.5 %.

Mr. Speaker, it appears that that the bicameral committee doesn’t impose a precondition at all. Annual budget deficit due to mismanagement and rampant graft and corruption already exceeds 1.5% of the GDP.

In the end, lifting VAT exemptions on oil and power, like the House proposal of a 12% VAT, is anti-poor, and will only put more Filipinos deeper in poverty. Anakpawis party-list, on behalf of the Filipino poor and the toiling masses, reiterates its firm stand against this infamous tax measure.#


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