MANILA, Philippines -- (UPDATE) President Gloria Macapagal-Arroyo has effectively closed the doors to proposals to either remove or reduce the 12-percent value added tax as she lashed out at critics for pushing "popular but counter-productive, short-term gains."
Arroyo said she was open to a debate with those opposing her fiscal reform measures, which included the implementation of the VAT.
She added that these measures were here to stay, stressing that they have shielded the nation from the worst effects of the food and fuel crisis.
"We have come too far, made many sacrifices on the hard but wiser road taken," she said, adding that now is not the time "to turn around" and "give up enduring strength for popular but counter-productive, short-term gains."
"Repealing other taxes on oil and power will strip the vast majority of our people the means to ride out the world food and energy crisis," Arroyo said in a speech launching the government's energy saving programs by the use of compact fluorescent light at the Philippine International Convention Center Wednesday.
"In our discourse on the most effective solutions to our people's travails we will not agree on everything. It's easy to understand why many would want to see taxes on oil and electricity removed. But we have to carefully address some hard questions. If VAT on oil and power is lifted, how do we replace more than P70 billion in revenues mostly used to fund projects for the poor," she said.
?VAT boosted investors confidence in recent years. From P56.50 to one dollar, the peso strengthened to P40.23 before oil and rice imports brought it back to P45.55,? she said.
She said that if the starting point was at P55, ?wouldn't the removal of VAT erode confidence, lift exchange rates, lift interest rates and therefore raise costs anyway and slow down the economy??
?Will scrapping VAT not be pro-rich who consume 84 percent of energy products,? the President asked.
?Isn't it better to use the VAT collected, mainly from the well to do, for direct assistance to sectors hard hit by rising global prices of food and fuel,? the President said in arguing for the retention of the controversial tax measure.
Responding to calls for her to review her economic policy, Arroyo said her administration had done the review months ago.
Arroyo said the government had in fact reversed its balanced budget target by acknowledging that it could not be met this year.
"Balancing the budget this year would have been a nice target for our fiscal turn around. But amid the call to review economic policies, we have in fact done our review months ago," she said.
Arroyo said the government was on deficit spending this year by about P75 billion pesos due to pressures brought about by the high oil and food prices.
"Even then we said that we will need to forego the pleasure of balanced in the depressed global environment. We announce our willingness to spend as much as P75 billion if necessary on social welfare. But if things will improve next year, we will return to our target," she said.
