RP needs public sacrifice to gain economic stability

It is inevitable for the "ordinary" Filipino to shoulder the burden of the implementation of the additional Value Added Tax (VAT).

The VAT increase of 12 percent, which was crafted to save the country from its ballooning multi-billion dollar debt, comes in the disguise of just hitting the corporate market. However the truth is, this burden will be passed on to the consumers, which consists of the majority, those living below the poverty line.

Mike Moran, senior regional economist for Standard Chartered Bank said that this move by the Philippine government to improve revenue collection is on track and expected to considerably help the ailing Philippine economy.

Already, some companies have announced that if the 12 percent VAT will be formally implemented, they have to pass on the cost to the consumers.

Aboitiz Equity Ventures (AEV) president and chief executive officer Jon Ramon Aboitiz earlier said that the company has no choice but to pass on the cost to the consumers, although in a conservative rate.

"The public has to sacrifice in order to ensure long term stability in the economy in your country," Moran said in an interview during the Standard Chartered Bank's Economic Review and Outlook Session held at the Cebu City Marriott Hotel recently.

Although, the additional 12 percent VAT may result to additional operating cost for companies, and eventually higher consumer or services prices, Moran emphasized that this is one of the effective ways so that the Philippines could achieve sound economic foundation.

He said there are only two tax measures that are seen to help the Philippines pay up the huge debt, to improve efficiency in revenue collection system, and putting additional tax obligations to private sector such as VAT.

So far, he said the Bureau of Internal Revenue (BIR) has done a good job in its revenue collection effort, thus giving the Philippines more rooms to pay its debt in the next few years.

"The Philippines has very well managed debt profile. But, it (Philippines) should not be complacent," Moran said stressing that aggressive and consistent effort in continuous improvement of revenue collection, and tax measure tightening should be critically monitored.

Because of the huge deficit of the Philippine government, every Filipino child born has already a debt to pay for at least P30,000, a research earlier noted.

An ordinary citizen has to pay his taxes double or triple. A wage earner pays his taxes, while paying indirectly another tax for value added in every service or consumer goods he buys from establishments.

Moran expressed confidence of the improving economic stability in the country, if only the current political intervention that wants to oust Arroyo, would be resolved very soon.

"The Philippines is not a stranger to political turmoil, or temporarily political uncertainty," Moran said that is why because of strong economic fundamentals and reforms implemented by the economist President the Peso is not severely affected.

Since the start of the "impeachment" threat, the Philippine currency only plunged from P54 to P55, and it's not really that alarming, although the situation has slightly affected the peso value.

But, so far the financial market has not yet felt the effect of the brewing political war, he added.