Palace seeking Congress’ consensus on tax bills

Malacañang said yesterday President Arroyo will try to forge a consensus with members of the incoming 13th Congress for her eight proposed tax measures to be passed into law.

Presidential Spokesman Ignacio Bunye said even before Mrs. Arroyo announced the other day that she will endorse these eight tax proposals, she had already consulted with some members of Congress.

"There is a consensus-building up on the tax plan in the reform coalition led by (Mrs.) Arroyo and leaders of the House and Senate," Bunye said.

The President unveiled the eight proposed tax bills during a businessmen’s luncheon meeting last Thursday. She said these measures were part of her "job creation and economic growth" legislative package, one of five she plans to submit to Congress.

She promised to spell out these five legislative packages when she delivers her State of the Nation Address (SONA) this Monday during the joint opening of the 13th Congress at the Batasan Pambansa in Quezon City.

"Work with Congress on these tax measures had already begun ahead of the SONA," Bunye said.

He added that the President plans to convene the members of the Legislative-Executive Development Advisory Council (LEDAC) a day after the SONA to receive inputs from opposition leaders in Congress.

"These will be followed up in weekly post-SONA meetings of the LEDAC," Bunye said. "The President will also hold a series of town hall meetings to bring this message across, backed up by an action plan to carry her pro-poor agenda forward."

Mrs. Arroyo’s economic managers estimate that the eight proposed tax bills can generate as much as P80 billion in additional revenue, complementing the planned administrative cost-cutting measures that may save the government as much as P100 billion.

"While we are vigorously pushing for the passage of the eight new tax proposals, we will actively go after tax cheats," Bunye said.

He cited that the increasing budget deficit poses a challenge to the President’s promise to provide a better life for Filipinos, especially the poor and disadvantaged.

"Urgent action is needed to push forward vital programs for the benefit of the poor," Bunye said.

The Arroyo administration set a budget deficit ceiling of P197 billion for 2004. Budget and Management Secretary Emilia Boncodin told The STAR that the government’s budget deficit reached P80.1 billion for the first six months of the year.

"So the next half of the year is practically covered. I can now sleep more soundly for the rest of the year," she said.

Among the eight tax proposals is the repeal of the value-added tax (VAT), a law which Mrs. Arroyo herself authored and sponsored when she was still a senator during the 10th Congress.

The seven other proposed tax bills include a shift to gross income taxation from the present taxing of net income, a tax on windfall profits of telecommunications companies, indexing of "sin" taxes on alcohol, tobacco and petroleum products; rationalization of fiscal incentives, targeted tax amnesty, and the creation of a performance-driven system for revenue-generating agencies.

The President also plans to implement changes in the government, some of which include an increase in some fees and charges by government agencies, an increase in the import duty of petroleum products, and "capturing more of the revenue potentials" of selected government-owned and controlled corporations.

Trade and Industry Secretary Cesar Purisima clarified that the tax on profits made by telecommunications companies is not the controversial "text tax" but a levy on the franchise these firms get free from Congress.

He also said the proposed executive order to impose duties on petroleum products is only a "temporary" measure that Mrs. Arroyo will implement until Congress passes a proposed measure on specific taxes on petroleum products.

Purisima, who heads the President’s economic team, explained they proposed the repeal of the VAT law because the revenue base of this tax has been eroded by many exemptions passed by Congress.

But Finance Secretary Juanita Amatong clarified that the actual proposal to be presented to Congress is a two-step scheme to increase VAT to 15 percent to punish establishments and individuals who fail to pay this tax.

The plan is to set a total VAT collection target for the year, then require an increase equivalent to one-half of the gross domestic product (GDP), or roughly P2 billion.

If this new target is not met, the government will automatically increase the VAT rate by two percentage points the succeeding year.

The government will then impose a similar requirement for that year to increase total VAT collections by another half-percent of the GDP. Failure to meet this will increase the VAT rate by another two percentage points.

The scheme was originally proposed by Finance Undersecretary Eric Recto, who said this scheme will compel VAT payers to police their own ranks along the supply chain. This will increase the efficiency of VAT payments by requiring enterprises to compel their suppliers and service providers to pay VAT.

"For example, if you are a manufacturer, you will have to make sure your suppliers are paying the right VAT and so forth along the entire supply chain," he said. "Otherwise, you know that you’re going to end up having to pay more unless everyone who deals with you pays the right VAT."

Recto said the proposal will mobilize the industry influence of huge conglomerates, whose operations and manufacturing activities form the bulk of business for a host of downstream industries.

"VAT is already a self-implementing tax measure," he said. "This way, we can say we gave people a chance to correct themselves before we increased the tax rate." — with Des Ferriols