BY IRMA ISIP
BUSINESS favors a cut in the value-added tax
from 12 to 10 percent, the original rate when the system was
adopted in 2002, over the abolition of VAT on oil and power, an
officer of the Makati Business Club said yesterday.
Alberto Lim, MBC executive director, said the
group has not taken an official stand pending the completion of
a study led by former finance undersecretary Milwida Guevara,
but the sentiment is for an across-the-board rate reduction.
Lim said MBC is opposed to the scrapping of
the VAT on fuel because families with a yearly income of less
than P100,000 account for only an estimated 18 percent of
consumption. Those with earnings of P100,000 and above account
for the remainder.
Lim said members are also against a proposal
of Rep. Exequiel Javier of the House committee on ways and means
to set a ceiling on VAT on oil at $103 per barrel.
"We do not agree because it becomes a
specific tax. VAT is a chain. Every step of the way, there is an
add-on. The chain should be maintained," he said,
"What we recommend: Ibalik ang VAT sa 10
percent on all products and not just oil. Do it now so more
people, especially the poor, would benefit. Anyway it looks like
we would be able to achieve a balanced budget by 2009," he said.
The VAT system was adopted in 2002 when the
government was faced with a fiscal crisis arising from an
ever-growing budget deficit. It has since succeeded in shoring
up government finances, resulting in an improvement in the
country's credit ratings.
In 2006, the VAT was expanded to cover the
previously exempted oil and power sectors.
This year, the government was originally
programmed to post a P75 billion deficit but lower spending and
higher revenues due to windfall collections from rising prices
are expected to trim the deficit to around P60 billion.
The government opposes the scrapping of VAT
on oil because it said the revenues collected, which are paid
for by the rich and the middle classes, are used to bankroll
pro-poor programs under "Katas ng VAT."
The government places the windfall
collections arising from rising crude oil prices at P4 billion
in each of the two previous quarters.
Sen. Mar Roxas, who first called for the
scrapping of the VAT on oil, said crude oil was only $35 a
barrel when placed under VAT coverage in 2002.
Roxas said the government is piggybacking on the rise of
crude oil to currently around $140 a barrel at the expense of
the people.
