Gov’t urged to introduce new tax measures or raise taxes

MANILA, Philippines - Albay Governor Joey Sarte Salceda said the government must introduce new tax measures or raise taxes, particularly the value added tax (VAT) to shore up funding for quality infrastructure and social services.

In a briefing following the Philippine Economic Forum, Salceda underscored the need to implement new tax reforms to boost state coffers.

Salceda floated a proposal to increase the rate of VAT to 14 percent from the current 12 percent, which is one of the lowest in Asia.

“The government must adopt new measures to shore up tax revenues.  These measures should serve as the second wave of tax reforms to be implemented by the Aquino administration following the passage of the sin tax reform bill,” he said.

The first year implementation of the sin tax law was highly successful with incremental collections reaching P51.5 billion or 50 percent beyond the government’s forecast.

VAT is a tax on every sale of goods or services, or importation of goods. It applies only to the value added by the seller at each stage as the goods or services pass along the distribution chain.

It may also be an indirect tax since the seller who is directly and legally liable for the payment of VAT passes the burden of the tax to the consumer by adding or including the tax to the selling price,

Finance Secretary Cesar Purisima earlier noted the measly growth in VAT collections despite a growing economy.

From 2009 to 2012, the BIR’s VAT collections rose 19 percent, slower than the increase in the country’s gross domestic product.

For this year, the BIR aims to collect P325.74 billion from VAT,  higher than its 2013 goal of P268.63 billion.

The VAT reforms were introduced as part of a package of fiscal measures aimed at putting the public sector deficit and debt on a sustainable path.  In November 2005, the VAT base was extended to energy products and selected professional services and in February 2006, the VAT rate was increased from 10 percent to 12 percent.

Bureau of Internal Revenue commissioner Kim Henares said the agency was open to Salceda’s proposal but reiterated that the review would only come after the passage of four key economic bills – Fiscal Incentives Rationalization bill, Tax Incentives Management and Transparency Act, Amended Mining Revenue bill, and the Customs Modernization bill.