Senate junks bid to spare BOT contracts from VAT in proposed tax bill

The Senate has rejected a proposal to exempt from the value-added-tax (Vat) all Build-Operate-Transfer (BOT) contracts despite a senator’s warning that the public might shoulder the additional burden.

Seven senators voted against Senate President Pro Tempore Ralph Recto’s proposal while five voted in favor of it during the continuation of the plenary deliberations on the proposed tax reform measure on Monday.

In pushing for his amendment to the planned tax bill, Recto cited as example the operations of the Metro Rail Transit (MRT) and Light Rail Transit (LRT) that are currently exempted from Vat.

“If you privatize LRT, MRT and the rest, will they be subject to Vat?” the senator asked to which Senator Sonny Angara, chairman of the Senate committee on ways and means, answered yes.

“That’s why I propose that those services rendered by government today similar to an MRT, LRT na BOT halimbawa, private sector na ang gagawa para hindi tumaas ang presyo sa mga users, be exempt from paying a Vat.  There’s no revenue loss to government, Mr. President, because all its inputs they still pay the Vat,” Recto asserted.

Besides, he added, there is no existing law that says the MRT and LRT, for instance, should be subject to Vat.

“So I’m passing this idea to the body because we have an opportunity here, looking at the future, once you privatize all of these, those prices for users will go up by 12 percent. Now if you use this law to fix that problem already, then all future contracts to be written by government maliwanag na rather than have court cases later on in the future,” Recto added.

But Angara said the Department of Finance was not inclined to accept his colleague’s proposal “because the revenues scope would be quite wide.”

But Recto insisted there would be no revenue loss or leakage if the BOT contracts would be exempted from Vat.

“I don’t see how there won’t be any revenue loss because Mr. President because we’re giving Vat exemptions to concessionaires under BOT contracts so that’s a wide range of services. So I think there will be revenue loss,” Angara said.

In the end, the chamber decided to reject Recto’s proposal.   /kga