BILLIONS LOST: Many readers were amazed by the fact, long hidden from them, that while Value-Added Tax (VAT) extracts 12 percent from consumers, only about 3 percent actually goes to the government.

A big chunk of the VAT billions collected is reportedly pocketed by merchants who take advantage of the loose system or connive with corrupt taxmen.

If the Bureau of Internal Revenue disputes the extent of the leakage, disclosed by Bataan Gov. Tet Garcia in our last Postscript (Sept. 22, 2011), all it has to do is come out with its audited figures.

Instead of squeezing more blood from the overtaxed population, meanwhile, the government should tighten controls to ensure that every tax peso is accounted for and properly used..

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HOW THEY CHEAT: From the reactions of Postscript readers (I note only feedback from those who give their names and addresses), we picked the email of Imelda Dacuycuy, who said in part:

“Everything you wrote in your VAT column is true. The BIR also knows that the government earns more with the previously imposed 6-percent sales tax. There is no contra deduction on this tax so the government gets the full 6 percent, if the income declared is correct.

“Tax examiners used to focus only on the income earned and declared. But here comes the VAT with 12 percent (formerly 10 percent) on gross collections (VAT Output).

“To decrease VAT Payable, all the taxpayer has to do is gather VAT receipts to deduct 12-percent VAT Input on cost of income and expenses. Taxpayers may just gather VAT receipts for gasoline, food (representation kuno), maintenance and office supplies, equipment and fixtures, etc. Auditors cannot trace whether the gasoline receipts were for personal or office use.

“The auditors cannot prove either that claimed restaurant expenses were to entertain clients or friends/family members. The same with maintenance supplies, which could either be for residence or office. There are equipment bought, such as computers, that are used at home by supervisors.”

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DACUYCUY ADDS: “During the old Sales Tax days, only the collections were lowered to reduce tax payable. With VAT Output, not all collections are declared if the VAT Input on expenses is low. There are two options to lower the VAT Payable: not to declare all collections to lower VAT Output, and to gather non-business VAT receipts to increase VAT Input.

“In some cases, the government’s VAT share is even less than 3 percent. After VAT, when the taxpayer computes his Income Tax due, he can still reduce the income tax by gathering non-VAT receipts.

“The end-users, not the manufacturers or the merchants (who can even profit from it), shoulder the VAT. I wish the proposal to scrap the VAT will push through. The 3-percent percentage tax can still be imposed on small businesses, and the 6 percent on higher income bracket.”

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COMPACT SONA: In his US visit last week, President Aquino sounded like he was delivering a more compact State of the Nation address in his remarks before gatherings and meetings with foreign officials and businessmen.

Maybe because his message was shorn of showbiz distractions and thus delivered to the point, it suddenly merited a second serious listening to the hometown crowd thousands of miles across the Pacific.

For one, I found myself listening in when he told officials of the World Bank and the International Monetary Fund in Washington, DC, of his administration’s putting in place “strategic interventions that promote inclusive growth.”

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NEW OPTIMISM: The president-son of Ninoy and Cory Aquino was pitching for more aid and understanding from foreign governments and agencies.

“Institutions have been eroded to the point that doubt is a Filipino’sinstinct when dealing with government,” he said. “Decades of trauma born of corruption and impunity have festered and calcified, and while my people approach the future with renewed optimism, it remains guarded optimism.”

He said the government raises hope through “strategic interventions” that include increased spending for health and education, expanding the conditional cash transfer program, ending large-scale corruption, and implementing a zero–based budgeting process.

The President said that savings generated by more honest andtransparent budgeting have increased spending on social services and defense.

As a result, he added, the country has earned four positive rating actions over the past 15 months. He also mentioned the recent World Economic Forum Global Competitiveness Report, which showed a 10-point jump in the Philippines’ ranking.

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NETTING BIG FISH: Reporting on jobs, he said: “Keeping our 8-percent unemployment rate from going up meant creating a million jobs every year. But we were not only able to maintain it, we improved on it by bringing it down to 7.2 percent.”

On his drive against government crooks, he said: “Ending corruption means not only cleaning up the system, but holdingaccountable those who have wronged my people. Accountability allows closure to the many sins against my people over the past generations.”

The campaign claimed another casualty days ago with the dismissal of Leny Fermin, treasury operations officer of San Carlos, Pangasinan, for allegedly embezzling P9 million in city funds.

A day before, former military comptroller Carlos Garcia was locked up in the Bilibid prisons. Before flying to the US, the President Aquino confirmed a military court’s verdict in 2005 that Garcia had violated the Articles of War 96 and 97.

Despite the expected resistance, the President is doggedly moving to mend damaged government institutions, systems and procedures. His severe and systematic crackdown on corruption is bound to net more and bigger fish.