VAT’s this?

There is not what you might call joy in Mudville over the Senate’s passing of its version of the VAT bill, but the general attitude seems to be "we’ll take it." Considering the alternatives, I guess I can agree that this was better than nothing.

This doesn’t mean that the VAT conundrum is behind us. Far from it. The bill is now in bicameral conference committee, where everyone knew it was headed for in the first place. There, optimistic lawmakers tell us, all differences will be threshed out and a consensus bill will be produced within seven days, although Senate President Frank Drilon is talking about an April 30th deadline.

From where, I wonder, does this optimism come? For starters, the posturing about a hiked VAT rate of 12 percent, the House position, versus the Senate insistence on a status quo of 10 percent is clothed with virtual blood oaths about solons preferring to fall on their own swords rather than surrendering. The House has said more than once that 12 percent is "non-negotiable." Some senators say that they will retreat from 10 percent when hell freezes over.

Here’s the thing: Words, like looks, can kill. The more one swears on a stack of bibles that one shall remain steadfast, the less one is inclined to change one’s position. And it’s not only out of fear that God might dispatch a lightning bolt from up above, but the greater fear of being held out to public ridicule for speaking with forked tongue and no spine.

Some congressmen are convinced that the senators will eventually agree to 12 percent but will lay the blame on the House. Guess again. Because of the senators’ posturing, a capitulation premised on being able to point an accusing finger at someone else will still be seen as capitulation. In fact, it would be a retreat made all the more ignominious because of all the hot air that has been expended about concern for the plight of our poor and abused countrymen. The common tao might well ask whether our brave senators suddenly turned into timorous kittens in the face of those big, bad congressmen.

Actually, I don’t expect them to turn into kittens, at least not within seven days or by April 30th. I expect our senators to fight like hell and hold out, hopefully for much less than the 55 days Peking was under siege during the Boxer rebellion. Those days will be spent, not so much in thoughtful disquisition on the 10 vs. 12 issue, but in looking for a face-saving device for whoever it is that is disposed to blink first.

Obviously, someone will have to blink first, or we won’t get an amended VAT law, which is unthinkable. So, who will it be? Will it be our fighting congressmen or our patriotic senators? Who will leave the conference hall first, with tail firmly between legs, regretting the day they started issuing statements about sticking by their ideals and principles.

Well here’s a hint: Albay Representative Joey Salceda, Malacañang insider on economic matters, says a VAT law wouldn’t be credible and meaningful without a 12 percent rate, and can’t see that the rate can be subject of a compromise. House Ways and Means chairman Jesli Lapus calculates that the Senate bill will bring in from P40 to P60 billion only, while the House version can deliver the P80 billion GMA says she needs.

Senator Serge Osmeña, on the other hand, claims the Senate version could raise P60 billion at 70 percent collection efficiency, and "up to" P80 billion at 100 percent efficiency. But when has anything in this country ever been at 100 percent efficiency?

Given the complexity of the Senate’s VAT bill, even 70 percent may be iffy.

Some features of the Senate bill will attract spirited debate. These include the proposed repeal of the franchise tax on power companies and reduction of excise taxes on certain petroleum products. While these are designed to mitigate the effects of the lifting of the VAT exemption, the Finance Department is concerned the foregone revenue may substantially reduce the expected revenues from the new VAT coverage of the power and petroleum sectors.

Another bone of contention may be that surprise Enrile amendment which prohibits power generation, transmission and distribution companies from passing on VAT taxes to household consumers, and explicitly declares it "the express intent of the law that the tax herein levied shall be borne exclusively by the companies."

Obviously, the Enrile amendment is politically popular since it would insulate all household consumers of electricity, apparently of whatever social or economic level. However, it would appear that the tax could still be passed on to commercial and industrial users of electricity who could then charge the tax to consumers of their products. Arguably, then, ordinary consumers would still bear part of the tax burden if, and I stress if, they are consumers of the products of these companies.

The other issue which has already caused rumblings within the business community is the Senate proposal to increase corporate income tax rates from the current 32 percent to 35 percent until 2009 when the rate will revert to 32 percent.

There are other areas, too, which the bicam shouldn’t assume will be easy sailing. The lifting of exemptions from VAT on domestic airlines and shipping companies, and on professionals such as lawyers and doctors, won’t happen without a struggle. It would help if Congress doesn’t somehow insist on a no-pass on provision for these newly taxable sectors.

Although a major hurdle has been cleared with the passage of the Senate bill, a VAT law which will genuinely respond to the country’s fiscal crisis isn’t in the bag. Don’t pop the champagne bottles yet. Certain legislators in both the House and the Senate, who are not members of the bicameral conference committee, are even now still regaling media with bellicose statements about their no-retreat, no-surrender stance.

The bicam members probably ought to act like that conclave of cardinals that will soon elect a new pope. Cloister yourselves in an uncomfortable venue, mesdames et messieurs, hold the merienda, cut the press statements, forget the 2007 elections and just get the damn job done. And when you’re ready, send up plumes of white smoke, mount a stage and grandly announce, "We have a VAT law."

I guarantee you the cheering will rival that which will be heard in St. Peter’s Square when the name of the new pope is publicly revealed for the first time.