House bent on cutting VAT by half

By Jess Diaz (The Philippine Star)
Updated January 16, 2011 12:00 AM

MANILA, Philippines – The House of Representatives is bent on reducing the 12-percent value added tax (VAT) to six percent.

Batangas Rep. Hermilando Mandanas, ways and means committee chairman, said yesterday his committee would submit its report on the reduction when Congress resumes session next week.
He said he is asking President Aquino to certify his bill on the 50-percent VAT cut as urgent and to include it in the list of priority measures he plans to present to leaders of Congress.

He said his proposal would “lower direct VAT payments of consumers, eliminate the corruption-laden input tax credit deductions and increase by P50 billion the government’s VAT collections.”
He added that by considering his VAT reduction bill, the House is not going against the President’s appeal for lawmakers to desist from imposing new taxes.

Mandanas pointed out that VAT is not a new tax and that his proposal, which his committee has endorsed, in fact calls for reducing and not increasing the levy.

Under the Mandanas bill, the VAT would be reduced to six percent but would be applied on all manufacturers, producers, wholesalers, traders, and retailers of products and services, as well as on end-users.

He lamented that under the present system, the 12-percent value added levy is shouldered only by end-users or buyers of products and services.

Businessmen and other merchants involved in the production, distribution and sale of products and services do not pay VAT as the law entitles them to what Mandanas calls “input tax credit deductions.”

For instance, Mandanas said owners of malls and supermarkets can claim part of their infrastructure, security and electricity costs as deductions.

Because of these deductibles, the government, in many cases, ends up having a financial obligation with mall and supermarket owners and other businessmen, instead of it receiving VAT payments from these merchants, he said.

For his part, Quezon Rep. Danilo Suarez said he would continue to push for the restructuring of excise taxes on cigarettes and liquor, or the so-called “sin” products.

He said tax rates on these products have been fixed in 2004 yet, and the small adjustment the law allows is not even enough for inflation.

His proposal calls for reducing the tax brackets for cigarettes from four to two, and at the same time increasing the rates.

The Mandanas committee is still considering the Suarez proposal and similar measures introduced by several House members, including Representatives Henedina Abad of Batanes and Niel Tupas Jr. of Iloilo.

Mandanas, Abad and Tupas are party mates of the President in the Liberal Party and are part of the majority coalition in the House, while Suarez belongs to the minority.

Suarez lamented that administration allies are sitting on tax proposals despite the fact that the government badly needs additional revenues.