SHARES TUMBLE AFTER SC FREEZES NEW TAX AIMED TO CUT DEFICIT
MANILA, July 4, 2005 (STAR) (AP) - The stock market on Monday took the brunt of investors' ire over a Supreme Court decision to stop a new value added tax, or VAT, the centerpiece of the government's economic reform policy.
The benchmark Philippine Stock Exchange Index fell 2 percent to 1,858.11 points early Monday, adding to 3.5 percent loss in the past four sessions on anxiety over rising oil prices and allegations that President Gloria Macapagal Arroyo rigged last year's elections.
Aiming to narrow the fiscal deficit and balance the budget by 2010, Arroyo's administration in May decided to increase the number of products and services subject to the 10-percent tax to include petroleum products, electric power, airline and shipping fares.
The Supreme Court on Friday moved to freeze its implementation after opponents of the tax petitioned the court to halt the process, arguing that it was unconstitutional for president to increase the VAT without lawmakers' approval.
"If the people could hardly cope with the rising prices of goods and services ... you could imagine the intolerable sufferings they will face once VAT is jacked up," said opposition Sen. Aquilino Pimentel, adding the new tax "could be a prescription for a social revolt."
The court gave each side 10 days to comment, with oral arguments set for July 26.
Government lawyers said they will file a motion Monday to challenge the Supreme Court's temporary restraining order.
Corazon Guidote, presidential consultant on investor relations, said the expanded VAT was part of the country's medium-term development plan and "we cannot afford anymore setback."
Finance Secretary Cesar Purisima estimated that temporary suspension of the VAT law will cost the government up to 5 billion pesos (54 million US dollars) a month.
"This can result in a serious setback in our fiscal consolidation program. That's why we are going to appeal with the Supreme Court," he said, adding the freeze, although temporary, was enough to erase the government's fiscal gains this year.
Reported by: Sol Jose Vanzi
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