MANILA, December 28, 2005
 (STAR) The implementation of the second round of the expanded value-added tax (EVAT) will help propel the economy, despite the political crisis hurting the country’s image in the local and international community, Malacañang said yesterday.

Press Secretary Ignacio Bunye said the first round of the EVAT’s implementation, which took effect Nov. 1, has already proved to be a "harbinger" of fiscal stability, confidence, investments and jobs.

"Let us look at the bright side of this tax measure in terms of our long term gains instead of our short term pains," Bunye said.

"The success of the first round of EVAT implementation is enough reason to expect that we will reap more on the second and final round," he noted.

Officials have announced that the EVAT rate would be increased from 10 to 12 percent by Feb. 1, despite warnings from both allies and critics of the Arroyo administration that it would spell political disaster for the President.

"The whole world is looking at the Philippines to prove that we are a strong player in an interdependent regional and global economy," Bunye said. "The two-percent increase in EVAT rate will bring us closer to economic takeoff and there is no turning back."

The EVAT hike is part of the amended EVAT law that is designed to spur economic growth and improve the country’s outlook as far as the local and international investment community is concerned.

Presidential political adviser Gabriel Claudio and Finance Secretary Margarito Teves said in separate interviews that the conditions for raising the EVAT rate were present, although official figures would only be ready by Jan. 26 or Jan. 27.

Under the law, the EVAT hike becomes mandatory if collection exceeds 2.9 percent of the gross domestic product and the national government deficit exceeds 1.5 percent of GDP.

"We can’t back down and let up on our efforts now that the fiscal reform agenda of the country is beginning to yield positive signs and environment for an economic turnaround is present," Claudio said.

Teves disclosed that the EVAT hike will generate an additional P35 billion in revenues for the government.

He said the increase should not be optional so the government will be seen as serious in its intent to put the Philippines’ fiscal house in order.

"It will be very helpful because we expect to generate an additional P35 billion per year that will help reduce the deficit and help us invest in infrastructure and social service," he said.

Measures were put in place to protect the public from its economic impact, he added.

"The (new revenues) can help us build better school buildings, housing and (provide) other social services," Teves said. "For the businessmen, (there will be) better infrastructure that will attract investments and jobs."

Claudio affirms that many of the positive economic indicators are there now "because of the firm resolve of government with the help of Congress and the private sector to pursue fiscal reforms."

Officials hope that improvements in the economic condition will spill over to the political front. — Aurea Calica

Chief News Editor: Sol Jose Vanzi

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