GMA to rely on Congress in effort to raise taxes

The Arroyo administration is pinning its hopes on Congress and its resolve to pass key legislations that would arrest its fiscal crisis, such as the indexation of the excise tax on sin products and the rationalization of the excise tax on automobiles.

Finance Secretary Jose Isidro Camacho told reporters yesterday that it was also critical for Congress to reject the legislation that would exempt professionals from the value added tax (VAT) for another two years.

Camacho said it is unlikely for Congress to pass the critical legislations so close to the elections but he said it should have no problem blocking the VAT exemption of professionals.

"All it has to do is not act on it," Camacho said. "This is critical because government will forego actual revenues if we continue exempting professionals from VAT."

The Department of Finance (DOF) has estimated that the government will forego at least P8.6 billion in tax revenues if professionals are exempted from VAT.

The continued exemption is being pushed by Rep. Julio Ledezma, a known supporter of the entertainment industry which has been lobbying aggressively for exemption from the VAT.

The proposed exemption covers other professionals such as doctors, engineers, brokers and dealers. They pay the usual income tax but their services are exempted from the VAT.

Camacho said it is also critical for Congress to pass the proposed legislation that will index the excise tax on sin products based on inflation. Sin products include cigarettes and alcohol, two of the government’s largest sources of tax revenues.

According to Camacho, the rationalization of excise tax on automobiles should also push through since this would help boost automotive sales and therefore allow the government to collect the tax.

"Specific tax on alcohol and tobacco are not yet indexed to inflation," Camacho said. "More-over, the excise tax on automobiles declined despite over 10-percent increase in sales because of the excise tax-free loophole in the existing law."

Other legislative measures are: the Fiscal Responsibility Act, Government Procurement Act and the Internal Revenue Measures Act.

This year, Camacho said the decline in revenue was caused by the decline in interest rates, lower inflation rate and the fact that the economic growth was concentrated in sectors that do not contribute proportionately to tax revenues.

Camacho said there was also a delay in the implementation of legislative measures intended to plug the loopholes in tax collection. As a result, the Bureau of Internal Revenue (BIR) only realized P6 billion out of the P16-billion target for the full year.

Camacho said revenues also suffered from the decline in the sale of petroleum products as well as the continued weakness of the banking sector due to low interest rates and loan provisioning.