TOLL VAT: The typhoon-related state of calamity has pushed away from public focus the 12-percent Value-Added Tax on tollways imposed starting yesterday over the objections of motorists and consumer groups.

Bent on raising more revenue from taxes, the Aquino administration ignored the adverse implications of VAT collection and started yesterday adding P12 to every P100 toll payment.

The prices of goods and services affected down the distribution chain are expected to rise.

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PASS-ON EXPENSE: Tollway collections are already being taxed. To tax the same revenue again under the VAT system is double taxation, which is illegal and unconscionable.

Since tollway operators are allowed to retain part of the VAT as their “input” tax, which is without limit (meaning as much as can be supported by receipts), they can end up remitting only around 3 of the 12 percent they had collected.

Actually, the bulk of the VAT is being collected by tollway operators FOR THEMSELVES, not for the government. Why are motorists being made to pay tax, in effect, to private tollway operators?

Although only around 3 of the 12 percent goes to the government, merchants paying 12 percent are liable to pass on to consumers the entire 12-percent VAT as it is an actual business expense.

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BIG LEAK: The government does not have the equipment, personnel and political will to check if the input tax being claimed by businessmen is true and correct. Result is confusion and tax collection reduced by as much as 75 percent.

The Bureau of Internal Revenue has conceded that the tax leakage has been some 50 percent, an admission that the projected collection from VAT is not and cannot be fully realized.

The educated guess of people in the know is that if the BIR makes an honest report on gross and net VAT revenues, it will be shown that not more than 3 of the 12 percent goes to the government.

An honest report will show that the bulk of the VAT goes mostly to businessmen collecting it (ostensibly for the government, but actually for themselves).

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SIMPLER ALTERNATIVE: This has given currency to the proposal that VAT be replaced with a simpler direct tax of maybe 6 percent that businessmen will be required to REMIT IN FULL to the BIR without retaining part of it as they do under the VAT system.

With this simpler alternative, consumers would PAY LESS TAX (6 percent is less than 12 percent) and the government would DOUBLE ITS REVENUE (6 percent is double 3 percent).

This proposed replacement of the VAT looks simple – which is probably one of the reasons why the usual smart officials in government do not want to adopt it.

Actually this direct tax system used to be in place. That was before the International Monetary Fund and the World Bank pressured the Philippine government to adopt the VAT system.

President Aquino should tell the IMF-WB to first convince the United States to adopt VAT before pressuring this small country. The US threw out the VAT idea, because it requires a big army of personnel and a huge budget ($700 million annually) to collect it.

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MORE ROPE: On the legal front, the Supreme Court has not granted the plea for a Temporary Restraining Order (TRO) to suspend VAT collection while the main petition questioning its validity is being heard.

The SC spokesman said the tribunal ran out of time before Oct. 1 to render a decision. Although this did not touch on the merits, it has emboldened Malacañang to proceed yesterday with the collection of VAT on the tollways.

Even if the government holds the legal high ground in the VAT controversy, its insistence on making motorists pay 12 percent — with the bulk of the tax going instead to tollway operators – and raising prices down the line may prove to be politically costly.

My feeling is that the Supreme Court, without meaning to, may have given the Aquino administration more rope to hang itself. What if after days of collecting the VAT on tollways the High Court suddenly shoots it down on the basis of equity and public interest?

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SOLAR CHEAPER: A friend from Cagayan de Oro told me that those of us who argue that solar power is an expensive source of renewable energy should visit the solar power plant in barangay Indahag in the city.

We visited instead the Cagayan Electric Power and Light Co. website where it says that its effective rate (residential) is P6.08/kwh including VAT plus generation, transmission, systems loss, etc., charges. That is Mindanao rate. Comparable Meralco (Manila Electric Co.) rate is P7/kwh.

The Cepalco solar farm, where 6,500 solar panels are laid out on two hectares, has been providing one megawatt of clean electricity for the past seven years to CDO and the towns of Tagoloan, Villanueva and Jasaan, including the 3,000-hectare PHIVIDEC Industrial Estate.

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FAST INSTALLATION: The solar power firm began operations in 1952 with a modest generating capacity of 5000 kw and a customer base of only 750. Now Cepalco serves some 120,000 customers that include residential (102,216), commercial, industrial and bulk power users.

When Cepalco commissioned in 2004 the country’s first solar power plant, the computerized and fully automated solar photovoltaic plant was the largest of its type in the developing world.

The Cepalco model shows how the government may hasten the installation of solar power plants in Mindanao to minimize brownouts there. Solar farms can complement existing coal-fired plants and can be installed even in off-grid areas.

As installation is fast, my friend said, a 10-mw solar power plant can be built and commissioned in just six months or even less because it is clean, without carbon emission and does not have fuel requirements.