Villar assures speedy repeal of 70% input VAT

Senate President Manuel Villar has assured the business community that senators will expedite the passage of a Malacañang-certified bill that seeks to repeal the 70-percent cap on the creditable input value-added tax (VAT).

The assurance came after business leaders and captains of industries paid a courtesy call on Villar, Sen. Juan Ponce Enrile, and Sen. Ralph Recto, chairman of the Senate committee on ways and means, at the Senate last Wednesday.

During the dialogue at his office, Villar said he supports the immediate passage of the bill and expressed optimism they can do this before going on recess on Oct. 14. "As long as the Department of Finance has no objection, I will support its passage. I am fully ware of the issues surrounding this bill," the Senate President said.

Recto said majority of the Senators already agreed to pass the bill without amendments, a version completely identical with its House counterpart. If passed with out amendments, the bill will not go through a bi-cameral conference committee and will instead go directly to the President for signing into law.

The Department of Finance earlier asked President Arroyo to certify the bill as urgent, describing the 70-percent input VAT cap as a disincentive to business.

During a courtesy call at the Senate last Wednesday, the heads of the Philippines Chamber of Commerce and Industry; the Federation of Filipino Chinese Chamber of Commerce and Industry, Inc; the American Chamber of Commerce in the Philippines; the Federation of Philippine Industries; the Australian-New Zealand Chamber of Commerce in the Philippines; the Philippines Institute of Petroleum; the Philippine Institute of Certified Public Accountants and Tax Managers’ Association of the Philippines thanked Villar and Recto for giving priority to the passage of the bill.

But they also appealed to pass the Malacañang-certified bill before Congress goes on recess on Oct. 14.

"Distributors and retailers are already hard up on their businesses because of the imposition of the 70-percent cap on the creditable input value-added tax. We hope the repeal would already be effective by Nov. 1," said Tomasa H. Lipana, chairman and senior partner of the auditing company Isla, Lipana and Co.

Philip Morris Philippines Manufacturing Inc. (PMPMI) managing director Chris Nelson seconded her, saying the 70-percent input VAT is a clear disincentive to business, especially for those at the end of the distribution chain, where they have very small profit margins.

"In the long term, the cap would affect competitiveness and ultimately, the overall financial of VAT-registered entities who have always been good corporate citizens," said Nelson, who is also a director of the American Chamber of Commerce in the Philippines (AmCham).

Businessmen warned that the 70-percent input VAT cap may actually result in the closure of some low-margin businesses if Congress doesn’t immediately act on it or consumers will bear the burnt with the burden being passed on in the form of higher prices.

Big distributors and dealers of consumer goods said the 70-percent input VAT cap would result to a severe drain on their bottom line.

Vicente Dinglasan, president of IDS Philippines – a leading distributor of fast-moving consumer goods in the country, said a lot of distributor of fast-moving consumer goods in the country, said a lot of distributors and dealers would have no recource but to absorb the 70 percent cap on the input value-added tax instead of passing it on to the consumers.