MANILA, Philippines -- Some P45 billion worth of social services and infrastructure development projects are programmed for implementation this year using funds generated from the value-added tax (VAT), according to the Department of Finance (DoF).

Of the total amount, P13.06 billion will go to social services, including feeding programs in public schools, scholarships for children of poor families, livelihood and health programs, and resettlement housing for squatters.

The bigger share of P32.33 billion will go to the construction of roads, bridges and railroads, flood control facilities, repair and construction of school buildings, irrigation projects, and the installation of airport and navigational facilities.

This is the reason why the proposed lifting of the VAT on oil would be impractical and a disservice to beneficiaries of the projects and programs funded by VAT revenues, the DoF said in a paper it submitted to the House of Representatives opposing moves there to lift the VAT on fuel.

The amended VAT law raised the VAT rate from 10 to 12 percent, and expanded the coverage of the tax to include, among others, oil and electricity.

Pro-poor

In a position paper, the DoF said that contrary to what those who want the tax scrapped or suspended say, the VAT law was pro-poor because it helps government to implement various programs for low-income families.

The law requires the government to allocate a certain portion of the additional VAT revenues made possible by the law?s amendment for social services and infrastructure.

For this year, at least 40 percent of the additional VAT collection must go to social services and infrastructure.

The government expects to collect an estimated P100 billion more in VAT because of the increase in the rate and the expansion of VAT coverage.

Last year, the government was mandated to allocate 35 percent of the additional VAT collection for social services and infrastructure.

Government data showed that it collected P88.8 billion in additional VAT last year. Of the amount, P31 billion, or 35 percent, was actually spent on social services and infrastructure.

Distributed

The amount was distributed to various government agencies, including the agriculture, labor and employment, science and technology, public works and highways, and social welfare and development departments, the Commission on Higher Education, the National Anti-Poverty Commission, and- some government-owned and controlled corporations.

Because of the sharp rise in oil prices in the past few months, proposals to scrap the VAT on oil have mounted.

The DoF is opposed to this, arguing that it will be the high-income earners and not the poor who would benefit from it as the poor consume much less fuel.

Rep. Exequiel Javier has filed a bill in the House seeking to lift the VAT on oil while imposing a higher specific tax on the commodity.

Javier said his twin proposals were a compromise between the interests of those who want the VAT on fuel lifted and the government which needs to collect more taxes to fund more social services.

He said consumers would be paying less under a specific tax system than under the VAT regime, but the government will still be able to collect the needed tax revenues.