Petroleum dealers ask SC to recall decision on EVAT

Saying the Supreme Court failed to fully appreciate the destructive and punitive impact of the provisions of the EVAT law that they have questioned, the petroleum dealers asked the high court to reconsider its decision upholding the constitutionality of the EVAT law in its entirety.

"The Supreme Court failed to fully appreciate how the questioned provisions would actually operate the destructive and punitive nature of the questioned provisions of the EVAT law, and the oppressive effect of the questioned provisions on petitioners petroleum dealers, other similarly situated business enterprises, and the citizenry as a whole," the dealers wrote in a 53-page motion for reconsideration.

The petroleum dealers earlier petitioned the Supreme Court to declare unconstitutional the EVAT law insofar as it (a) limits the amount of input VAT that may be credited against output VAT to the extent of 70 percent of output VAT, (b) requires that input VAT on depreciable goods costing more than P1 million be amortized over a period of 60 months, and (c) imposes a five-percent final withholding VAT on gross payments by the government or any of its agencies, including government-owned or controlled corporations, on their purchases of goods and services.

In addition, opposition lawmakers led by Sen. Aquilino Pimentel and Rep. Francis Escudero, respectively, and a party list, Abakada Guro, filed similar petitions. Unlike the petition of the petroleum dealers, the other petitions challenged the constitutionality of the entire EVAT law and not merely certain provisions.

After hearing the oral arguments of the petitioners, the Supreme Court dismissed all the petitions in a decision promulgated on Sept. 1, 2005 and upheld the constitutionality of the EVAT law in its entirety. The petitioners have 15 days from receipt of their copy of the decision within which to file a motion for reconsideration.

In the meantime, the temporary restraining order (TRO) issued by the high court on July 1, 2005, which prevented the revenue authorities from enforcing the EVAT law, remains in force until such time that the judgment becomes final.

In the motion for reconsideration, the petroleum dealers claimed that for a majority of taxpayers with a nominal gross profit margin, such as themselves, the limitation on input VAT is unjust, arbitrary, unreasonable, oppressive, and confiscatory, ultimately threatening their continued viability.

If left with no other alternative, businesses might be constrained to pass on the unjust and inreasonable burden brought about by the input VAT limitation to the end consumer, thus immediately and effectively causing a "cascading effect" in terms of a gargantuan and unexpected increase in the prices of basic and other commodities, on top of the 10 percent VAT already imposed.

According to the petroleum dealers, the 70-percent cap on input VAT would cause an increase in pump prices of petroleum product by approximately P3 to P6 base on pump as of July 1, 2005, as against a mere P2.30- to P2.50-increase in pump prices if only the 10 percent were considered without the 70- percent cap.

Since July 1, 2005 the peso has depreciated and the price of petroleum in the world market has increased. The weakening of the peso and rising crude costs would further aggravate the burden brought about by the 70-percent cap, said the petroleum dealers.

In dismissing the petroleum dealer’s Petition, the Supreme Court rejected the dealers’ argument that input VAT is a property or property right protected by the due process clause of the Constitution. "Input VAT is a mere statutory privilege that the state can remove or limit," said the Court.

The dealers, however, countered in their motion for reconsideration that by recognizing that the excess input VAT is retained in a business’ book of accounts and remains creditable in succeeding quarters or may be the subject of an application for tax credit certificate, the Supreme Court effectively recognizes that excess input VAT is indeed an asset.