15% VAT to raise P74 billion in fresh revenues for government

MANILA, Philippines - The government may collect as much as P73.92 billion in fresh revenues by 2015 if the government increases the value-added tax (VAT) rate to 15 percent by 2013, according to estimates made by the Department of Finance (DOF).

Estimates showed that the government may raise an initial P11.33 billion from a gradual increase in the VAT rate to 13 percent in 2011 from the current 12 percent and if corporate income tax rate is reduced to 28 percent from the current 30 percent, according to the latest estimates from the (DOF).

Under the plan, which the Finance department would recommend to the next administration, the VAT rate will then be raised to 14 percent in 2012 coupled with a reduction in the corporate income tax rate to 27 percent. This is expected to result in P35.3 billion in fresh revenues for the government.

The VAT rate would then be finally raised to 15 percent by 2013 while the corporate income tax rate would be reduced to 25 percent. This is expected to yield P56.04 billion in fresh revenues.

In 2014, revenues are expected to increase to P64.41 billion as the economy improves and in 2015, the new VAT rate is expected to raise P73.92 billion, estimates from the DOF also showed.

It would now be up to the next administration to decide whether or not it would raise the VAT to 15 percent.

The International Monetary Fund (IMF) has earlier conveyed that it wants the next administration to raise the country’s VAT rate to roughly 15 percent from the current 12 percent and reduce the income tax rate to about 21 percent from the current 30 percent as suggested by economists from the University of the Philippines.

In 2005, the government had raised the VAT through the Reformed Value Added Tax Law to 12 percent from 10 percent. The same law lifted exemptions on oil and petroleum products despite stiff opposition from consumers and cause-oriented groups.

In 2008, the government raised P121.14 billion from the RVAT law or P32.21 billion higher than the P88.93-billion collected in 2007.