Ex-treasurer slams 15% VAT, corporate tax cut

MANILA, Philippines - Former National Treasurer Leonor Briones is strongly opposing the proposal of the Department of Finance (DOF) to jack up the sales tax or value added tax (VAT) to 15 percent from the current level of 12 percent to raise much-needed revenue to plug the country’s ballooning budget deficit which hit a record P298.5 billion last year.

Briones, who served as national treasurer during the term of former President Joseph Estrada, said in a statement that she is also against the planned reduction of the minimum corporate income tax to 21 percent from the existing 30 percent.

“I am aghast by the regressiveness of the proposal. This is like Robin Hood in reverse!” she stressed.

According to her, the VAT does not distinguish between the rich and the poor.

“We have always opposed VAT as it does not distinguish between the rich and the poor. Both pay the same 12 percent VAT rate when they eat in Jolibee but for sure, the poor family is burdened more by the VAT compared to the rich family,” she added.

Briones, who is running as nominee to Congress of Kaakbay Partylist and a convenor of Social Watch Philippines, pointed out that the government needs to plug the leakages in VAT collections before increasing th rate further to 15 percent from 12 percent.

“For VAT to work effectively, there should be no exemptions. In fact, well-intentioned as it is, the lowering of the VAT rate applied to purchases made by senior citizens is a major leakage in VAT’s implementation. I am proposing though that consumers be made to collect an input VAT credit so that a culture of receipt-consciousness is created among our people. That way, government is really able to track the incomes of businesses and professionals like doctors and lawyers and collect from this hard-to-tax group better,” she added.

It will be recalled that the government through Republic Act 9337 or the Reformed Value Added Tax Act of 2005 increased the VAT rate from 10 percent to 12 percent and jacked up the minimum corporate income tax rate to 35 percent from 32 percent as part of the fiscal reforms adopted by the administration of President Arroyo.

The corporate income tax rate, however, was reduced to 30 percent starting January 2009 as mandated under the reformed VAT Law.

“And where did the lowering of the income tax rate proposal emanate? Income taxes are actually the more progressive way of collecting taxes as those who earn more are being asked to contribute more to the government coffers. What will happen, therefore, is that government collects more from the poor by imposing regressive taxes like the VAT and collecting less from the rich by lowering the income tax rates,” the former national treasurer said.

Early last month, Finance Secretary Margarito Teves urged the next administration to raise the VAT to 15 percent from 12 percent and slash the minimum corporate income tax to 21 percent from 30 percent to help ensure the country’s fiscal sustainability.

The proposal was strongly supported by multilateral lender International Monetary Fund (IMF).