Angara says VAT hike ‘would only burden ordinary Filipino consumers’

Senator Sonny Angara. INQUIRER FILE PHOTO

Senator Juan Edgardo “Sonny” Angara has rejected calls to raise the value-added tax (VAT) rate to compensate for the projected revenue loss from reducing income tax rates, saying it would only burden ordinary Filipino consumers.

“I don’t agree with the move to increase VAT as it would only burden ordinary Filipino consumers. The VAT is a pass on tax—meaning businesses and corporations claim their input tax but they pass on the ultimate tax to the consumers,” Angara, chairman of the Senate committee on ways and means, said in a statement on Wednesday.

“So it kind of defeats the purpose of having inclusive growth because by raising VAT, we’re passing on the burden to ordinary Filipinos who are paying the taxes,” he said.

Angara was reacting to the proposed VAT hike—from the current 12 percent to 14 percent—supposedly to compensate for the projected revenue losses if income tax rates would be reduced.

READ: Finance chief bucks VAT hike plan

The country’s 12-percent VAT, he said, was already the highest in the Association of Southeast Asian Nations (Asean) region, which has an average VAT or sales tax at 8.56 percent.

The senator also cited a study by the National Tax Research Center (NTRC), which showed that with the current VAT rate of 12 percent, a VAT effort of 3.75 percent indicates that only around 30 percent of the economic activities were captured by VAT.

The same study, he said, estimated that the country’s VAT gap, which represents the difference between potential VAT revenues and actual collection, stood at P135 billion in 2009.

According to NTRC, the ballooning VAT gap might be attributed to weak tax administration, underdeclaration of sales, non-issuance of receipts and excessive claims of input VAT.

“The country also has a huge informal economy. We want to engage those people by formalizing them and getting them not necessarily to pay taxes but to register so the government can give them assistance,” said Angara.

“Ang tingin kasi ng mga maliliit na negosyante, kapag nanatili silang underground, makakaiwas sila sa mga bureaucratic fees and costs. Dapat nating ipaunawa sa kanila na mayroong mga karampatang insentibo kapag sila ay nagparehistro,” he added.

(Small business owners think that if they remain underground, they could avoid bureaucratic fees and costs. We should make them understand that there are incentives if they register.)

While he is against the VAT hike, Angara said his committee could review the list of VAT exemptions and identify the transactions that should no longer be exempted from it. RAM