One-year suspension of vat pressed

October 21, 2018
Imee Marcos

Better than deferment of second tranche of excise taxes.

ILOCOS Norte Gov. Imee Marcos said suspending the Value Added Tax on basic commodities – including food, fuel and electricity – for one year will benefit a wider number of Filipinos at a faster pace instead of waiting for the suspension of the second tranche of excise taxes next year.

“The suspension of the VAT would provide immediate relief to Filipino consumers. Given the magnitude of prevailing tax rates, the temporary suspension of the VAT on basic necessities would be immediately felt by millions of Filipino families,” Marcos stressed.

“Suspending the VAT on basic food items, fuel and electricity will directly counteract the strong inflation pressures on these goods,” she said.

Marcos, who is running for senator in next year’s midterm elections, noted how Ilocos and Davao regions were hardest hit by recent inflationary pressures.

“My province has one of the highest inflation levels in the country and my provincemates are really struggling to make ends meet. We need immediate and meaningful relief from the national government,” Marcos said.

According to the Department of Finance, basic food items such as rice, fish, meat and vegetables have been major drivers of inflation this year, with the contribution of rice alone rising 10 times to 1 percentage point of the inflation rate.

Data from the Philippine Statistics Agency showed that rice was the number one contributor to inflation in September 2018, and that food items in the consumption basket accounted for more than half of the inflation rate in the same month.

While VAT revenues accounted for a fifth of overall tax revenues, amounting to approximately P365 billion, Marcos said the national government has the capacity to absorb the VAT revenue loss given the rising tax revenues with the Tax Reform for Acceleration and Inclusion Law.

“While collection efficiency has improved, there are still areas for improvement, and thus taxes to be collected. If, for example, income tax collection grows by at least 10 percent, the government is poised to earn P102 billion in 2018 and P113 billion in 2019,” the governor said.

“That 10 percent growth rate in tax collections is even an underestimate given that our economic growth remains strong amid high inflation and the 2019 mid-term elections will spur economic activity,” she added.

TRAIN Law excise taxes will contribute P85 billion while running after tax evaders more vigilantly could add another P25 billion to compensate for the potential revenue loss if VAT is suspended.

Marcos said government agencies must also increase their absorptive capacity, citing the projected P140 billion spending deficit for the whole year. She also pushed for the abolition of the National Food Authority, which would add another P7 billion.

“These measures alone will result in P362 billion in revenues, enough to compensate for the potential VAT revenue loss,” she pointed out.

“Since VAT revenues can be covered by these measures, the numbers indicate strong evidence to justify the suspension of VAT,” said Marcos, who also served as lawmaker in the House of Representatives representing Second District of Ilocos Norte from 1998 to 2007.

Marcos said she was prompted to strongly advocate for the suspension of VAT after she personally observed the debilitating impact of the skyrocketing inflation to her constituents and other Filipinos in the countryside.

“It is really depressing that Filipinos living far from highly urbanized areas are suffering the brunt of inflation, which could have been readily addressed by immediately suspending the VAT for one year,” the Ilocos Norte governor lamented.