12% VAT on toll likely

08/12/2010 - Despite a public clamor against its implementation, Malacañang is bent on imposing the 12 percent Value Added Tax (VAT) on toll rates of expressways starting Monday, August 16, stressing that its proceeds will benefit taxpayers in the long run.

Presidential Spokesman Edwin Lacierda, however, said they would respect the Supreme Court if it would decide otherwise and grant the plea for a temporary restraining order (TRO) filed by former Nueva Ecija first district Rep. Renato Diaz and former trade assistant secretary Aurora Ma. Timbol against the tax measure.

"We understand that there’s a case already filed before the Supreme Court. I think that we will wait for the action of the Supreme Court whether they will grant a TRO. In the meantime, as there’s no TRO and the Senate is still discussing with the Bureau of Internal Revenue (BIR), it would appear that the VAT on the toll would be a go. Unless, otherwise directed," Lacierda said in a briefing Thursday morning.

The Palace maintained that the BIR has thoroughly studied the matter even though one of the authors of the VAT law, administration ally Senator Ralph Recto, claimed that toll rates are not covered by the law.

"That has been the position of the BIR even prior to this administration. In the opinion of several incumbent commissioners it is an early tax that should be collected. And so, unless otherwise restrained by the Supreme Court that is a position taken by the BIR," Lacierda said, even as he expressed confidence that the High Court will rule in government's favor.

Lacierda said President Benigno S. Aquino III is true to his campaign promise of not imposing new taxes during his administration, noting that the VAT on toll is an old law.

"With respect to the tax on toll, that has been deferred by the previous administration. But that is a tax that should have been collected before. So, in our opinion it is not a new tax. It was a measure by the previous administration not to do so. But we realized that there’s a tax that’s required to be collected and unless again, unless otherwise restrained by the Supreme Court, it will be collected. It is not a new tax, let me emphasize," he explained of the tax measure which would enable the government to collect P1 billion worth of taxes every month.

Lacierda maintained that the imposition of the VAT on toll is "for a greater good" although it appears as an added burden to the public. Some sectors fear that the tax measure would eventually lead to hike in prices of prime commodities as goods from the provinces pass through the tollways.

"We should remember that the proceeds from this tax will be used to fund the government's pro-poor programs, This administration will spend the taxes collected to worthy programs unlike during the previous administration. We are looking right now at all the programs that are working, that are doable and use all these revenues for social services, for alleviation of poverty. So, that is the purpose why we are collecting all these taxes for a greater good," he said.

The same goes with the impending fare hike of the Metro Rail Transit line 3 (MRT3), he said.

"With respect to the MRT, it’s still being under study. But let me emphasize that the reason why we are moving the subsidy of the MRT is in order for us to divert whatever subsidies that we are giving to MRT to a more – a social program. We divert it to more useful and beneficial social programs that will alleviate the poor. That will help the general population rather than a selected few. Let us realize the fact that we are going to divert this money from a losing entity and towards something which is more beneficial to the people at large," Lacierda said.

The Palace also welcomed the Senate inquiry on the tax measure, saying that "it is an honest and frank discussion of how the law is interpreted."

Lacierda said they even respect the views of their allies, Senators Recto and Franklin Drilon, even if they are against the plan to impose tax on toll.

At the Senate, meanwhile, despite the intense grilling by senators, officials of the (BIR) and Toll Regulatory Board (TRB) on Thursday said they would push through with the implementation of the 12-percent VAT on toll fees on all expressways on Monday and that only the President and the Supreme Court can stop its implementation.

At the first public hearing on Thursday by the Committee on Ways and Means chaired by Recto Henares and TRB Executive Director Manuel Imperial were subjected to intense grilling by senators in connection with the imposition of 12 percent VAT on toll fees.

Defending the issue, Henares said the imposition of the 12 percent VAT on toll fees is legitimate since it is provided in the amended VAT Law.

“Ang ini-imposan po ng VAT, hindi po 'yung pamasahe, (kundi) 'yung binabayad ng jeep at bus sa paggamit ng kalsada. Magkaibang transakyon yung dalawa (VAT will not be imposed on the fare but on the fee for using the expressway. That's two different transactions)," she said.

But Recto, along with Senate President Juan Ponce Enrile and Drilon, was apparently not satisfied on the presentation by Henares and other government officials present at the committee hearing about the VAT imposition on toll fees.

After the hearing at the jampacked Pecson room, Recto said he respects the views of Henares, saying she is competent and honest but claiming she is wrong on her position and explanation,

After hearing all arguments and presentation, Recto insisted it is impractical to impose VAT on toll fees, saying it is illegal as it is not covered by the amended VAT Law.

Recto said Republic Act 9337 or the Expanded Value Added Tax which he himself authored, excludes land-based transportation, pointing out it is contrary to what the BIR chief had pointed out.

Drilon was obviously frustrated by the presentation of Henares and Imperial, prompting him to call on Finance Secretary Cesar Purisima to defer the planned toll hike on Monday.

Drilon expressed frustration when Henares and TRB officials could not explain clearly the issue on whether government services are VAT-able or not. “You cannot tax a tax, Drilon said, apparently referring to the toll fee that he said is already a tax.

Recto said he too felt frustrated, saying he exerted so much effort to convince concerned government officials particularly Henares to defer the VAT imposition on toll fees . “I just hope President Aquino and his Cabinet men monitored this hearing where we explored all means to stop this VAT issue.”

Recto said he fears that once implemented, it will have political and economic implications on the Aquino government, which he said is barely 43 days old and is now imposing taxes.

It can be recalled that Aquino during the presidential campaign vowed to not raise taxes unless it is extremely necessary.

Recto said he even called Executive Secretary Francis Ochoa and Henares Wednesday night and explained why the 12 percent VAT on toll fees should not be imposed.

But, he stressed, this administration is apparently determined to implement their decision.

He said he strongly believes that once implemented, there will be sure increases on transportation fares, and prices of products, including vegetables and petroleum.

During the hearing, He particularly cited Section 6 of the law which states that only common carriers by air and sea relative to their transport of passengers, goods or cargoes from one place in the Philippines to another are covered by the 12 percent VAT.

He earlier assailed government officials who use the amended VAT Law to justify the new tax proposal despite Aquino’s promise during the campaign period that he will not impose new taxes on consumers. (Manila Bulletin)

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