VAT few are chosen | Inquirer Business

VAT few are chosen

/ 05:14 AM November 23, 2017

To wrap up the so-called Train in Congress, the administration of the motor-biking Duterte Harley will have the next 18 working days.

Train is the “Tax Reform for Acceleration and Inclusion,” also known as the tax reform package, which the administration claimed to be good for 99 percent of all Filipinos—i.e. excluding the richest 1 percent.


Unfortunately, Congress will not be open for business soon. The current session that resumed on Nov. 13—after a month of indispensible break— will end on Dec. 15, as lawmakers need to take an imperative vacation for the holidays.

In May, Duterte Harley certified Train as an urgent bill. He followed up the call in his second State of the Nation Address in July. He wanted to start implementing the reforms by January 2018.


Six months later today, the bill still hangs in Congress, awaiting the bicameral conference committee to reconcile the different versions from the two chambers.

Based on the computation of the Department of Finance (DOF), the administration had asked Congress for P150 billion in additional revenue for 2018.

But the version of the House of Representatives would yield a lower P120 billion; the Senate version, an even much watered-down P60 billion.

Thus, the committee must do an awful lot of work in 18 working days, if Duterte Harley must get his package in time for January 2018.

Also, various interest groups are lobbying against the package.

Never mind that the administration needs the additional revenue from Train. Under the Senate version, for instance, the budget deficit would hit about 3.4 percent of GDP in 2018, versus the maximum set by the administration at 3 percent.

Or the administration could cut down on spending for the “Build Build Build” infrastructure program and the various social programs espoused by Congress such as the free tuition in state colleges.


By the way, the package was already done, ready for filing in Congress, way back during the previous administration, but it only gathered dust at the DOF.

With some refinement, the Duterte Harley administration thus was able to deliver it to Congress in less than a year.

Its main feature was the drastic cut in personal income taxes.

To recover the revenue loss and realize revenue for infrastructure projects, the administration asked Congress for new taxes on diesel fuel, luxury automobiles and sugar drinks.

Still, the biggest revenue measure would be the removal of various exemptions from the 12 percent value added tax.

It so happened that, in this country in the past, the legislature could pass special laws to exempt all sorts of businesses from VAT.

We remain the only country in the world that could do that —out of some 195 countries.

The National Internal Revenue Code, or NIRC, specified 72 exemptions from VAT, but Congress passed special laws for 84 more exemptions.

We now have 156 VAT exemptions, compared to 37 in Indonesia, 35 in Thailand, 25 in Vietnam and 11 in Malaysia.

Under Train, the administration asked Congress to remove 67 of the exemptions, which the problematic Senate version cut down drastically.

The administration wanted to raise P62 billion from the removal of the VAT exemptions; the Senate version gave it only P14 billion.

In other words, the lobbyists again won.

From what I gathered, the biggest lobbyists came from the shipping, housing, power, and the special economic zones— particularly the chosen few that were registered with the Peza.

Through the years, Congress was able to pass seven special laws for VAT exemptions for Peza locators, which of course just became fronts for smuggling.

DOF estimates put the VAT leakage in Peza-registered zones at about P200 billion a year.

Look, even malls were registered with the Peza. Tax exempt!

Read Next
Don't miss out on the latest news and information.

Subscribe to INQUIRER PLUS to get access to The Philippine Daily Inquirer & other 70+ titles, share up to 5 gadgets, listen to the news, download as early as 4am & share articles on social media. Call 896 6000.

TAGS: Tax Reform for Acceleration and Inclusion, tax reform package, Train in Congress
For feedback, complaints, or inquiries, contact us.

Curated business news

By providing an email address. I agree to the Terms of Use and
acknowledge that I have read the Privacy Policy.

© Copyright 1997-2022 | All Rights Reserved

We use cookies to ensure you get the best experience on our website. By continuing, you are agreeing to our use of cookies. To find out more, please click this link.