Salceda warns: Makabayan’s bid to scrap VAT of some goods may weaken peso further
MANILA, Philippines — Albay 2nd District Rep. Joey Salceda has warned the public that proposals for value added tax (VAT) exemptions on some basic commodities would only weaken the peso further.
Salceda, chairperson of the House of Representatives ways and means committee which tackles taxation matters, also noted in a statement that some of the products mentioned by the Makabayan bloc’s proposal are already VAT-exempt like sugar, beef, fish, salt, charcoal, and firewood.
Only canned goods, bread, biscuits, soaps, and candles were not yet VAT-exempt under the said proposal. However, he said that including these in the VAT exemptions would cause a deficit — and if the government fails to do budget cuts or raise income, it would make the dollar-peso exchange rate of P60 to $1 possible.
“Much of the inclusions in the Makabayan bloc proposal are already VAT-exempt […] Under the TRAIN and CREATE Laws, many prescription drugs are also already VAT-exempt. The other items in the proposal that are not VAT-exempt are canned goods, bread, biscuits, soaps, and candles. They amount to around P719.9 billion in total sales, or a loss of around P86.4 billion in tax revenues,” he said.
“If we don’t do budget cuts or raise new revenues to support the revenue loss, we may suffer a credit rating downgrade, loss of peso confidence. The Medium Term Fiscal Framework will also be extremely difficult to achieve. This kind of policy cocktail just makes the peso feasible at P68,” he added.
On Friday, Salceda also presented a chart showing that the items not included in the VAT exemptions were mostly consumed by middle-income to non-poor families.
Lawmakers from the Makabayan on Wednesday filed the said proposal amid rising inflation rates in an effort to shield the masses from economic problems.
If enacted into law, House Bill No 5504 would amend Republic Act No. 8424 or the Tax Reform Act of 1997 and include exemptions under the law’s Section 109.
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But instead of tax exemptions, Salceda suggested that the targeted cash transfer program should just be extended until December 2022.
Also, he suggested that the meals be fortified with vitamins so that consuming these would provide more nutritional value.
“The program is from April to September 2022, and covers P500/household for 12.4 million vulnerable households. If extended until December, this will amount to P24.8 billion. This will require that it be instructed by the President to the Cabinet through the Executive Secretary,” he said.
“Fortify bread, canned fish, and canned meat with nutrients so that households that consume these products gain more nutritional value for their purchases,” he noted.
For Makabayan bloc, the way to recoup the lost income — around P720 billion according to Salceda — is to implement a wealth tax for the country’s richest businesspeople.
Makabayan bloc even during the 18th Congress have been calling for a measure where the richest would be taxed — a super rich tax where people with over P1 billion worth of income would pay a tax of one percent of their income. Those with over P2 billion would pay two percent, and for above P3 billion, three percent.
Taxing the 50 richest Filipinos, Makabayan said in House Bill No. 10253 filed in the 18th Congress, would yield a revenue of P236.7 billion.
