MANILA, Philippines--The House of Representatives is not likely to get an ally in the Department of Finance (DoF) in its proposal to implement a simplified tax system that will reduce the tax rate from 12 percent to six percent, saying it will in fact make the end consumers pay more taxes.

Attending the hearing of the committee on ways and means Tuesday, Estella Montejo, head of the DOF?s fiscal policy and planning office, said the proposal of Batangas Representative Hermilando Mandanas for a Value Simplified Tax System (VAST) might result in a ?cascading system of taxation? that will even raise the tax being shouldered by the people.

In a separate position paper submitted to the committee, the National Tax Research Center (NTRC) also opposed the VAST as it would removed the input tax credit or the recovery of previously paid taxes.

?This means that the six percent tax on every sale of goods or services and importations will form part of the cost of goods or services and importation. . . . This will result to the cascading effects of taxation or the so-called tax-on-tax phenomenon which can only mean additional financial burden to the buyers of goods or services subject to the tax,? the NTRC said.

The NTRC said allowing the credit of the tax previously paid will also encourage businesses or taxpayers to ask for invoices or official receipts, which they will use to support their tax claims they wish to deduct from their tax liabilities to the government.

?Thus, it is important to maintain the input tax crediting feature of the VAT system because it provides a paper trail wherein the BIR (Bureau of Internal Revenue) can validate, check or audit taxpayers? claims and crosscheck the same with the issuer of the invoice or official receipts, if they declare these transactions as their tax returns,? according to the center.

Mandanas, however, said he would push for his bill despite opposition from the government financial agencies.

?The situation right now is only the final consumer, the ordinary Filipinos, pay the 12 percent VAT, so I?m proposing a change so that everyone in the chain, from the manufacturers to the suppliers to the retailers pay a six percent tax,? he told the panel.

For example, Mandanas said that when a person buys toothpaste, he pays the 12 percent VAT, but the grocery or the toothpaste manufacturer do not remit to the government the full 12 percent VAT.

Because of the input tax credit scheme, he said that corporations can invoke that certain amount be deducted from the VAT they will pay the government for expenses for capital expenditures.

Mandanas said the input tax and claims have been found to be a source of corruption and causes of material reduction in expected tax collections of government.

Mandanas? VAST system is proposing to replace the 12 percent VAT with six percent tax. It allows all exemptions to continue under the VAT system. There is also a provision applying the three percent tax on sales amounting to P2.5 million and below.

Pampanga Representative and former President Gloria Macapagal-Arroyo was among the lawmakers who sat in the hearing but did not raise questions. At one point, a DOF official referred to Mandanas, who was the chairman of the committee, as ?Madam Chair,? because she said she was looking at the former President. The official apologized for the gaffe.