VAT hits us with 12%, but gov’t gets only 3%
SIMPLIFY: The potentially explosive problems arising from the projected imposition of the expanded Value-Added Tax on expressway toll and oil fuels are only the thorns sticking out of an irrational tax system.
If a practical solution is desired, it appears that we may have not just to clip the thorns but uproot VAT and replace it with a direct sales tax that is lower and easier to compute and collect.
Such a drastic shift was broached by Bataan Gov. Tet Garcia the other day when we discussed the problem with him. He was the unsung author of a system that stopped the diversion of billions in internal revenue and customs duties by syndicates conniving with bank managers.
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SADIST GOV’T: The former congressman said the Aquino administration should not be afraid to displease the International Monetary Fund by scrapping VAT. There is an undisputed notion that VAT was adopted by the Philippines on insistence of the Washington-based IMF.
But the United States itself, Garcia noted, had rejected VAT — mainly because it entails huge spending for new equipment and additional tax personnel while leaving a proportionately small net tax collection and so much confusion.
Under our local VAT, 12 percent is collected from consumers at every stage of the market chain, but only around 3 percent reaches government coffers. The rest of the billions disappear along the way – some of it pocketed by cheating merchants and/or conniving taxmen.
While the government nets a measly 3 percent of the 12 percent collected, it imposes a heavy burden on consumers already reeling from low income and high prices. That is stupidity compounded by sadism!
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INPUT VAT: The government admits a leakage of some 50-percent of VAT collections. Garcia challenges the Bureau of Internal Revenue to disclose all the data to disprove his estimate that only 3 percent actually ends up with the government.
How does the bulk of the 12-percent VAT disappear? Of that amount, the law allows merchants to retain an “input VAT” equivalent to what they had paid for the goods/services before reselling them.
There is no limit to their input VAT claim as long as they support it with receipts and such paperwork, which is easy to do. They can also delay or totally forget to remit the balance after retaining the input VAT.
How does a handicapped BIR monitor VAT collections in the vast tax jungle infested with dishonest merchants and tax collectors? Even the mighty US stepped back from the daunting task.
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NO-TAX PROMISE: In comparison, a 6-percent tax in lieu of VAT is substantially lower than 12 percent. It is easier to compute and collect. And it nets the government something bigger than the 3 percent that VAT brings in at present.
If the tax-hungry administration does not moderate its appetite, it might end up politically disemboweled.
Ironically, then presidential candidate Noynoy Aquino promised that his administration would not impose new taxes or additional levies.
Some of us are waiting for the communication Hydra in the Palace to point out, as is its habit, that VAT is one of the hated vestiges of the previous Arroyo administration.
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CONSEQUENCES: The projected VAT imposition on tollways starting Oct. 1 has roused up objections from all over, especially the areas being served by the North Luzon Expressway, the South Luzon Expressway and other tollways.
Max Sangil, director of the Bases Conversion Development Authority, warned that truckers transporting sand, food and other essential goods through the tollways who will be hit by the increased toll are likely to pass on the added expense to consumers down the line.
The P652 one-way toll for a heavy truck (Class 3) multiplied by 2 for the return trip, plus the additional toll when it passes other tollways to Southern Tagalog will soar to thousands that will be tacked on the retail prices of goods
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MULTIPLY COSTS: Sangil cited one meat product maker in Pampanga alone who uses some 50 delivery trucks. There are countless similar businesses, not to mention the vegetable and other truckers serving Northen Luzon.
He mentioned a sand hauler who has 200 trucks carrying the construction aggregate to Manila each day. Multiply these cases by the total number of haulers to see the magnitude of the problem, he said.
Marlene Ochoa, vice president for corporate communication of the Manila North Tollways Corp. (the NLEx operator) said Class 3 vehicles plying the expressway average 12,000 daily. They comprise some 8 percent of total NLEx traffic.
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SENATE MOVE: The imminent problem has prompted senators to push a resolution urging the administration to defer the imposition of VAT on tollways alongside the planned increase in fares in the mass transit system.
Senate President Juan Ponce Enrile led his colleagues in supporting Resolution 602 introduced by the “Wednesday Group” of senators Manny Villar, Joker Arroyo and Ralph Recto.
“The situation in the country is such that there is too much burden on the public,” Enrile said. “Government must be ready to subsidize public services for the benefit of the poor.”
The resolution noted the increase of lightrail (LRT and MRT) fares in Metro Manila being aggravated by the imposition of VAT on the tollways.
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CAMI INDUCTION: The officers and trustees of the Capampangan in Media Inc. (CAMI) will be inducted on Monday by Pampanga Gov. Lilia G. Pineda at the Clark Freeport Zone. Members are urged to attend.
To be inducted are: Cris J. Icban Jr., chairman; Fred M. de la Rosa, vice chairman; Federico D. Pascual Jr., president; Ernie Y. Tolentino, vice president/Metro Manila; Ashley Jay Manabat, vice president/provinces; Nonnie L. Pelayo, treasurer; Joe P. Cortez, secretary-general; Vot Vitug, auditor; and trustees Jake Espino, Tony Lozano, John Manalili, Al Pedroche, Fred Roxas, Max Sangil and Vet Vitug.