Senate agrees to speed up work on VAT bill

Members of the Senate agreed yesterday to speed up the passage of the proposed value-added tax (VAT) bill by putting its most contentious provisions to a vote.

Senate President Franklin Drilon said the second all-Senate caucus held yesterday turned out to be more fruitful than last Monday’s since Sen. Juan Ponce Enrile, the most vocal of the bill’s critics, agreed to put amendments to the proposed measure to a vote on the floor.

Enrile walked out of last Monday’s caucus because he wanted to pursue the debates on contentious provisions on the floor so that they would be put on record.

Drilon said Enrile and other members of the Senate minority bloc agreed that senators could hold the vote after all the interpellations were finished.

He said that provisions under contention are the imposition of the VAT on independent power producers (IPPs), the removal of the franchise tax on the power distribution firms and the reduction of the excise taxes on petroleum.

"Since Senator Enrile and (ways and means) committee chairman Sen. (Ralph) Recto cannot come to an agreement on this point, then the two of them agreed that it will be put to a vote," Drilon said.

"All the issues insofar as Senator Enrile is concerned have been more or less resolved," he added.

Enrile wants to maintain the excise tax on petroleum while stripping it of its VAT-exempt status. He opposed the imposition of VAT on power transmission and distribution.

Enrile said the VAT chain would not be affected with the continued exemption of power since a paper trail is "established because there is a regulatory commission that determines the rate to be charged by transmission and by distribution utilities."

"In the case of VAT on generation, on the IPPs of Napocor (National Power Corp.), they will just pass the VAT to Napocor anyway. It will not hit them," he said.

Drilon said the senators have agreed to try and conclude the interpellations so that they could proceed with the amendments today.

However, even with the "breakthrough" in the discussions on VAT, most senators believe all the versions of the VAT bill can be consolidated into one measure that could be passed into law before Congress goes on recess this Friday.

At the least, the senators hope to pass their version of the VAT bill by Friday then convene the bicameral conference committee after the Lenten break.

Malacañang, on the other hand, is appealing to lawmakers not to go on their Lenten break without passing a final VAT bill.

Presidential political adviser Gabriel Claudio said the executive department hopes Congress will finish its deliberations, convene the bicameral conference committee and ratify the bill by Friday.

"We are hopeful that the Senate will pass the (VAT bill) within the week. We’re hoping they will ratify it before the Holy Week. We hope they will not go on recess without passing (the VAT bill)," he said.

Regular sessions of Congress end on Wednesday but senators and congressmen can extend them up to Friday if they want to work on urgent measures.

Under the rules, President Arroyo may call for a special session whenever she deems necessary for a measure to be enacted into law on time.

Claudio said a special session would only be needed if the VAT bill is not be passed by Friday.

Drilon and Speaker Jose de Venecia reportedly committed to conduct sessions on Thursday and Friday in order to finish discussions on the VAT bill.

Mrs. Arroyo earlier said she expected Congress to pass an efficient VAT bill before going on a Lenten break.

"Right now, it’s a work in progress and I have my full faith in the congressmen and senators – that they will come out with a bill that will signal to the world that our economy has turned the corner," she said.

Asked if she would veto a VAT bill she judges as unsatisfactory, the President said she would wait and see.

"Let us wait for the results of the bicameral conference committee," she said.

The President can exercise her veto power over bills ratified by Congress.

Mrs. Arroyo has repeatedly called on Congress not to derail the country’s fiscal reforms by delaying the passage of the VAT bill.

Her statement came as lawmakers ended their feud over the pork barrel allocations in the 2005 national budget, but remained at odds over which version of the VAT bill would be passed into law.

Under the version endorsed by the House of Representatives, the VAT rate would be increased from 10 percent to 12 percent. Exemptions would be lifted but lower rates would be levied on socially sensitive products such as fuel and electricity.

Petroleum products like gas and diesel, as well as electricity, would be levied a four-percent tax the first year, which would be hiked to six percent the next year, eight percent the third year, and finally up to 12 percent on the fourth year.

The Senate version would keep the rate at 10 percent but apply VAT on all products and services, including fuel and power. However, to cushion the impact of a 10-percent VAT on consumers, the senators had sought to scrap the franchise tax on power producers and a proposed excise tax on diesel.

Both versions retain the exemption enjoyed by airline companies on domestic passenger ticket sales and on lease or purchase of equipment. – With Aurea Calica