MANILA, July 29, 2005
 (STAR) DEMAND AND SUPPLY By Boo Chanco - The case questioning the constitutionality of the new EVAT law before the Supreme Court should also give us an opportunity to once and for all define the powers of the bicameral conference committee. The "bicam" has emerged in recent years as more powerful than either house of Congress.

It is at the "bicam" where real discussion or perhaps "horsetrading" takes place. It is also at this level where controversial amendments that were not discussed at either chamber, are introduced. And because both chambers often merely nod approval at the report of the "bicam", laws are passed with provisions that were not subjected to the scrutiny of the appropriate committee, subjected to public hearing or debated on the floor.

This was apparently what happened with a provision in the EVAT law that imposed a ceiling of 70 percent on the input VAT that businesses can claim. I understand while the EVAT bill was being discussed at the Senate floor, Sen. Serge Osmeña introduced a provision that set this limit at 90 percent but the "bicam" brought it down to 70 percent without considering the implications.

Serge had a good reason for wanting to set the 90-percent limit. Big companies are notorious for always claiming a larger input VAT than output VAT. As a result, they never pay anything… may utang pa sa kanila ang gobiyerno! This is done through accounting magic… by inflating inventory, overpricing supplies and front loading capex. You would be shocked to know the names of some of these giants, Serge remarked.

So Serge got the Senate to approve a 90-percent cap. This is equivalent to a one percent tax on gross. By comparison, businesses that are not VAT registered have to pay a three-percent tax on gross. Apparently, a congressman thought putting a cap was a good idea and as such, he figured it could be made an even better idea by putting the limit down to 70 percent and the "bicam" thoughtlessly approved the amendment.

By the time Serge realized what happened, the chairmen of the Senate and House Ways and Means committees were so traumatized by the experience of passing the EVAT bill that they refused to consider any more amendments. Serge was advised to just introduce an amending law soon after the EVAT law was passed Congress and signed by the President. Even then Finance Chief Cesar Purisima was sympathetic to the need to trash the 70-percent cap.

Well… Serge has filed his bill to bring back the cap to the 90-percent level he originally proposed. It is a simple bill that Congress should be able to approve in a week, if they wanted to. But that’s not going to happen given the many controversial matters on the agenda of Congress today. We may need the Supreme Court to strike the provision down simply because the provision did not pass the process prescribed by the Constitution for the passage of laws. In effect, the Court can set the boundaries of what the "bicam" can and cannot do.

I can understand why the petroleum dealers consider this a life and death fight for their business. Ruth Marbibi, who headed Petron’s market planning group and who is now a dealer along Sumulong Highway in Antipolo, pointed out that aside from the 70-percent cap, they are also protesting the withholding tax of five percent of sales to government accounts, since their mark-up on their acquisition cost is only three percent of sales.

Marbibi also said they are against the limitation imposed on the amount of input tax that can be credited for purchase of capital goods worth more than P1 million – (input tax credit spread evenly over 60 months). Given the cost of gasoline station equipment, the dealers say there would be no more investments if this is not corrected.

Having worked with the dealers during my stint with Petron, I can empathize with their problem. They perform a valuable role in society, take incredible business and security risks and their margins are razor thin. Fairness demands that legislators be more careful when they pass laws that affect the livelihood of this hardy group of citizens.

Good news

I came across a bit of good news from the online edition of the magazine of the Makati Business Club. This is the feature they had on the world class aircraft maintenance center here of Lufthansa Technik. Here is how MBC’s Philippine Business Magazine reported this rare bit of good news.

In September 2000, Lucio Tan’s MacroAsia Corporation and Lufthansa Technik AG entered into a joint venture to form Lufthansa Technik Philippines (LTP). Since then, LTP has earned the distinction of being a world-class maintenance hub and a "center of excellence" for Airbus A330 and A340 aircraft within the Lufthansa Technik network. LTP took over the former Philippine Airlines maintenance and engineering division and now has over 2,000 employees, most of whom are highly skilled Filipino aircraft mechanics and engineers.

LTP is recognized by worldwide aviation agencies, such as the United States Federal Aviation Administration and the European Aviation Safety Agency. Currently, it serves more than 20 local and foreign carriers, including KLM and Austrian Airlines. LTP specializes in the repair, maintenance, and overhaul of Airbus A330 and A340 planes. Aircraft that have five to 10 years of service are brought in to the LTP’s four-bay hangar.

Everything inside the aircraft is removed for maintenance, cleaning, repair, and if needed, replacement. Aircraft engines are removed and transferred to an adjacent engine shop facility for maintenance and tune-up work. Seats are transferred to a special workshop for detailed inspection and needed repairs. All seats are fitted with new upholstery. The aircraft’s old paint is stripped to see whether its body is showing signs of corrosion or fatigue. After repairs are done on the aircraft’s metal body, it is then repainted.

Highly skilled mechanics make sure that every switch and button in the cockpit functions properly. Mechanics and support staff work 24 hours a day, seven days a week, for fast, accurate, and continuous maintenance, repair, and overhaul of aircraft.

LTP has its own components shops that repair, overhaul, or alter aircraft parts or equipment. The rescue and safety workshop ensures that each life vest, raft, and other safety equipment inside the aircraft will function perfectly if the need for them arises.

After ensuring that everything is in perfect working condition, the D-Check ends with a test flight. On the average, the whole process of an Airbus A330 or A340 aircraft D-Check does not exceed 30 days.

The great thing about this world class facility is that our technicians do not have to go elsewhere to get world class kind of work and they no longer have to be separated from their families. In years past, PAL kept on losing its best mechanics to foreign aircraft maintenance centers. Now, they can stay home.

The Lufthansa Technik facility puts the Philippines in the map for a highly skilled technical service. It also helps earn foreign exchange for the country. Goes to show the Pinoy can be the best in the world… boosts our spirit at a time when we despair at the mess our politicians have created around us. If only we can export our politicians somewhere… so the rest of us can get some great work done.

Reported by: Sol Jose Vanzi

All rights reserved