MANILA, Philippines — The Department of Finance (DOF) is revisiting the implementation of the value-added tax (VAT) system as the government can no longer afford additional VAT exemptions in order to maximize potential revenues.
During the Kapihan sa Manila Bay forum yesterday, Finance Secretary Benjamin Diokno said the government stands to lose more if it will introduce additional exemptions to the VAT system, which is a form of consumption tax.
“The government cannot afford to lose additional revenues on VAT,” Diokno said.
“The DOF does not support any legislative or non-legislative proposals that would further erode the VAT revenue base,” he added.
Some lawmakers are pushing for the expansion of discounts as well as VAT exemption for senior citizens.
“There are many other proposals because they do not want the VAT. But I always say that consumption tax is better than income tax because it depends on your ability to consume,” Diokno said.
The Philippines has a long list of VAT exemptions, which prompted the previous administration to present a fiscal consolidation plan that included the repeal of some of it.
Former finance chief Carlos Dominguez previously called on the Marcos administration to retain the coverage of VAT exemptions to a few purchases only, including agricultural, food and medical products.?By eliminating the exemptions, the government can generate P142.5 billion in revenues every year.
Diokno said he agrees with that proposal, with the DOF planning to release the list of items that will no longer enjoy VAT exemption before the year ends.
“There are some worthwhile exemptions. We will review those and revisit once and for all which ones are reasonable,” he said.
The DOF is working with the International Monetary Fund to revisit the implementation of the VAT system.
“We want to address the gaps and develop appropriate reform measures to make collection more effective and responsive to the country,” Diokno said.