The senators floated the idea as a possible compromise to break the deadlock between the Senate and the House on the controversial VAT reform bill. The Senate wants to keep the present rate but lift all exemptions, while the House is proposing to increase it to 12 percent. Congressmen are also for lifting some exemptions.
Majority Leader Prospero Nograles said the proposal to empower the President to adjust the VAT rate after a year if the lifted exemptions fail to generate her revenue targets "might only open trouble on her bid to raise badly needed revenues if it would turn out that this stand-by power is legally and constitutionally flawed."
"Worse, this proposal might affect the entire VAT bill and cause a domino effect on the fiscal reform agenda of the administration.
"It would be unwise to take this road because we are not sure where it would lead to. If it would turn out that the President cannot exercise this power, its consequences on the economy will be irreversible," he added.
He said senators should instead take a stand and either stick to their decision to keep the VAT rate at 10 percent or go for the House proposal to adjust it to 12 percent.
Despite supposed arm-twisting from President Arroyo, senators voted last Tuesday to keep the present rate but lift all exemptions, including those on electricity and petroleum products like gasoline and diesel.
They believe their version could generate as much as P65 billion, which, if added to the P15 billion expected to result from increased excise taxes on cigarettes and liquor, would be enough to attain the P80 billion sought by Mrs. Arroyo to plug the country’s fiscal gap.
For his part, Minority Leader Francis Escudero said authorizing the President to adjust the VAT rate would constitute an undue delegation of congressional authority, which the Constitution prohibits.
He said senators should junk the proposal and insist on keeping the rate at 10 percent with most exemptions lifted.
"If after one year, revenues are not enough despite earnest efforts on the part of the government to collect all VAT levies, then the President can go back to Congress. I am sure we in the legislature can respond to situations that require prompt action," Escudero said.
Tarlac Rep. Jesli Lapus, who heads the House panel in the deadlock bicameral conference on the VAT bill, said his group doubts the constitutionality of allowing Mrs. Arroyo to increase the VAT rate.
He noted that under the Constitution, the delegation of presidential power to adjust rates is limited to "tariff, import and export quotas, tonnage and wharfage dues, and other duties or imposts."
"It is clear that taxes are excluded," he added.
Other congressmen urged Senate President Franklin Drilon and Speaker Jose de Venecia Jr. to find ways of salvaging the deadlocked bicameral conference.
Representatives Monico Puentevella of Bacolod City and Edwin Uy of Isabela said leaders of the two chambers of Congress cannot allow the impasse to drag on indefinitely because of its negative effect on the economy.
"We must resolve this as soon as possible before the fiscal problem reaches crisis proportions," Puentevella said.
Uy opposed the proposal by some colleagues for President Arroyo to intervene once again and break the deadlock in the bicameral conference on VAT.