PALACE  CONFIDENT SC WILL UPHOLD LEGALITY OF EXPANDED VAT LAW

MANILA, July 4, 2005
(STAR) By Paolo Romero - Malacañang is optimistic that the Supreme Court (SC) will uphold the legality of the expanded value-added tax (EVAT) law, officials said yesterday.

In an interview, Executive Secretary Eduardo Ermita denied allegations that Malacañang had a hand in the high tribunal’s issuance of a temporary restraining order (TRO) indefinitely suspending the implementation of the EVAT.

Reports said this was done as a political move to stave off Filipinos’ growing disenchantment with the Arroyo administration.

"That’s not true. We do not interfere with the judiciary and we were equally surprised and disappointed with the TRO but that’s the way it is," Ermita said.

He added that Malacañang still believes the EVAT "will be upheld because this has been deliberated upon for so long by legal and economic experts both in Congress and in the executive branch."

Press Secretary Ignacio Bunye said President Arroyo is confident the TRO would be lifted soon as the SC recognizes that the EVAT law, otherwise known as Republic Act 9337, is the main instrument to address the country’s fiscal woes and fund the government’s cash requirements.

The President earlier vowed to defend the law with the same vigor she showed pushing for the tax’s passage in Congress.

Bunye said the Office of the Solicitor General, along with the Department of Finance, will file a motion before the high tribunal today seeking to have the order lifted.

"We believe the SC would recognize that this is a very vital law," he said in a radio interview.

Bunye clarified that whatever taxes were collected during the initial implementation of the EVAT law last Friday would still have to be remitted to the Bureau of Internal Revenue.

Budget Secretary Emilia Boncodin echoed the Palace officials’ statements, saying the EVAT "is something that we can easily defend."

Boncodin, however, warned the TRO would affect the government’s deficit projections for the year. She said the government had earlier projected a P180-billion deficit for 2005 before the EVAT law was enacted.

With the new taxes, it was believed that the deficit could be reduced to P160 billion as the EVAT could raise some P20 billion from July to December, she said.

"If this (TRO) takes too long, it will derail our fiscal reforms and the funding of the projects already lined up because of the EVAT," she said.

Finance Secretary Cesar Purisima earlier warned the government could lose P160 million for each day that the TRO remained in effect. The revenue losses could reach P5 billion in one month, he said.

For his part, Senate President Franklin Drilon appealed to the high tribunal to resolve the issue involving the constitutionality of the EVAT law soon, adding that further delays in the implementation of the EVAT would affect the country’s economy.

He left it to the Palace to determine the extent of the "damage" that the temporary suspension of the EVAT could bring to the economy.

The President has prioritized the passage of the EVAT law in a bid to address the country’s worsening financial crisis. She has vowed to seek a reconsideration of the decision to get the country’s fiscal agenda in order.

Meanwhile, Senate Minority Leader Aquilino Pimentel Jr. urged the Bureau of Internal Revenue and the Bureau of Customs to concentrate their efforts on the approximately 30 percent of VAT that remain uncollected each year. Last year, this percentage translated into P65 million in actual uncollected VAT.

He said the Arroyo administration is only digging its own political grave if it goes ahead with increasing the VAT rate from 10 to 12 percent next year, as provided for in the EVAT law, which expanded the coverage of the tax to include petroleum products, power, airplane and shipping fares.

"If the people could hardly cope with the rising prices of goods and services, aggravated by the 10 percent VAT, you could imagine the intolerable sufferings they will face once VAT is jacked up to 12 percent. Political and social analysts agree that this could be a prescription for a social revolt," Pimentel said. ‘No Need For EVAT’ The government does not need the expanded value-added tax (EVAT) and can wipe out the budget deficit from existing revenue sources, according to the opposition in the House of Representatives.

"Proof of that is the statement of Budget Secretary Emilia Boncodin that with the Supreme Court restraining order on the EVAT law, the administration will have to raise additional money from existing sources," Minority Leader Francis Escudero said yesterday.

He said revenue collections have been increasing largely due to the efforts of Commissioner Guillermo Parayno of the Bureau of Internal Revenue (BIR) and his people to improve their performance.

"Commissioner Parayno’s all-out campaign against tax evaders is paying off. The administration should have started this on Day 1 of the Arroyo presidency four years ago," Escudero said.

He pointed out that aside from the campaign against tax evaders, the BIR has been trying to collect deficient taxes from businessmen covered by the present 10 percent VAT.

"In fact, BIR officials have announced that they have collected nearly P10 billion in additional VAT by just matching the sales declarations of VAT-covered enterprises with their VAT payments and without actually auditing these establishments. They could have collected more if an audit was done," he added.

Escudero emphasized that the BIR can clearly collect its VAT collection deficiency that a research paper written by Negros Oriental Rep. Herminio Teves, vice chairman of the House ways and means committee, estimated at P117 billion in 2004.

In that paper, Teves said the gross sales that the 161,536 VAT-covered enterprises declared last year amounted to P4.039 trillion.

At 10 percent, the gross VAT due from these establishments was P403.9 billion, but these businesses claimed "input VAT" or refunds amounting to P213.91 billion, he said.

Thus, the amount of VAT that should have been paid was about P190 billion. However, the BIR collected only P72.89 billion, or a deficiency of P117.1 billion, Teves said.

Escudero said if this deficiency alone is collected, there would be no need for EVAT "since EVAT is expected to bring in only P80 billion, the amount that the President has asked from Congress in terms of revenue measures."

He said aside from improving tax collection, the administration should launch an honest-to-goodness campaign against corruption which various studies have found out is depriving the government of at least P100 billion a year.

"The so-called all-out war against corrupt officials is just pakitang tao (for show)," he stressed.

As for the claim of Finance Secretary Cesar Purisima that the Supreme Court’s restraining order on the EVAT law means that the government would lose P5 million monthly collections, Escudero said "it is a case of the glass being half-full or half-empty."

"I would rather look at it this way: the Supreme Court order allows the people, most of them poor, to keep their P5 billion in their pockets and spend it on basic necessities instead of the government taking it away from them, and instead of corrupt officials stealing it. P5 billion a month means a lot for our people," he said.

The high court handed down the order upon petition by Escudero and his colleagues in the House minority who are challenging the constitutionality of the EVAT law.

A separate petition has been filed by Senate Minority Leader Aquilino Pimentel Jr. and several opposition senators. — Jess Diaz, Christina Mendez


Reported by: Sol Jose Vanzi

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