The amendment of the EVAT Law is supported by the Department of Finance (DOF).
The current EVAT Law has a provision that imposes a 70 percent cap on quarterly creditable input tax.
The cap, the FPI said, adversely affects some local industries and almost all the trading businesses. The cap would only result in higher prices.
FPI chairman Meneleo Carlos Jr. said that a cap of 90 percent or more on the input VAT would be a more acceptable compromise.
Carlos lauded the DOF’s move to defer the application of the 70 percent cap in its transitory implementation until the end of the year.
The deferment would give time to the DOF and industry groups to discuss and prepare the amendments as Congress resumes session in July.
Carlos underscored that the uncredited 30 percent input VAT could cost producers up to three percent more tax.
Based on the input and output table, almost 300 businesses and industry sectors have 30 percent or less value added.
FPI president Jesus Arranza added that industries cannot readily pass on all such costs to the consumers who are already burdened with high costs.
Some companies, Arranza warned, would book the additional VAT as liabilities in their balance sheet and debts would have to be incurred to pay the added VAT remittances.
The FPI added that if the cap provision is not amended before the end of the year, industries – particularly those affected by unfair trade practices and smuggling and whose profit margins remains at five percent or below – are in danger of closing shop which would consequently worsen unemployment.
Arranza stressed that the short-term gains from the EVAT measure would be a long-term loss to the economy should the 70 percent VAT cap provision remain.