, October 18, 2005
(STAR) By Paolo Romero - Malacañang is ready for the political fallout from the implementation of the expanded value-added tax (EVAT) law and maintained that President Arroyo will survive the public backlash despite her low popularity ratings.

Palace officials continued to reassure the public that there would be no drastic increases in the prices of basic commodities, transportation and fuel because of the EVAT.

"The Supreme Court (SC) decision on the EVAT will bolster our fiscal stability and this administration will implement it fully," Presidential Spokesman and Press Secretary Ignacio Bunye Jr. said.

In a press conference yesterday at Malacañang, Executive Secretary Eduardo Ermita and Finance Secretary Margarito Teves conceded, however, that the new tax law would have some effect on purchasing power.

But with mitigating measures put in place as well as strict price monitoring and a massive information campaign, they said the administration would be able to withstand the public furor over EVAT.

Teves stressed that Mrs. Arroyo is willing to risk her popularity for long-term benefits for the people by addressing the fiscal deficit though the "painful VAT."

"I’m not sure whether this (EVAT) is political suicide… there will be some initial difficulties but being a consumption tax, the EVAT will generally have a larger effect on those who consume," he said.

"All of these will have a spillover on the economy but we will work closely with all agencies so that we will be able to convince our people that though admittedly painful, we will survive and move this country (forward)," he said.

Teves and the President’s economic managers expressed belief that the EVAT implementation would save the Chief Executive rather than pull her deeper into political crisis.

He said the EVAT will be implemented "in a taxpayer-friendly manner that promotes compliance and effective administration."

Revenue generated from EVAT could be used to improve government services and the lives of the people and could eventually end public resistance to new taxes, Teves said.

"Economic development and growth have a favorable effect on the political equation," Teves added.

Bunye appealed to critics to respect the SC decision upholding the legality of the EVAT law and allow the tax to be implemented first.

"Now that the issue has been resolved with finality, we appeal to critics to respect the decision of the High Court and give this tax reform measure a chance," Bunye said in a statement.

All concerned government agencies were tasked by the President to explain the importance of EVAT to the people while at the same time instituting measures to cushion the effect of the new tax.

"Cabinet members were urged to be active in the information drive. The implementation of EVAT is not that bad, it may be a bitter pill but good for the body in general," Ermita said.

The Palace officials have issued the statements following reports from analysts that it is not Mrs. Arroyo’s political troubles but the EVAT that may cause her administration’s downfall. The remarks also came amid threats from the opposition that they would stage massive protest actions against what they said was a repressive tax.

Teves said the projected inflation for the year, even with the implementation of EVAT, would be 7.5 to 7.9 percent and anywhere between eight to 8.5 percent next year.

Energy Secretary Raphael Lotilla said the projected increase on pump prices would only be 2.5 percent on average and that the recent fare hikes granted to public transport already took into account the EVAT so there should be minimal increases in transportation cost.

Lotilla also reiterated that the government had reduced the excise tax and tariffs on petroleum products, which were previously VAT-exempt, to minimize the impact of the tax on fuel prices.

The energy chief said oil companies have promised to continue giving P1 discounts to public utility vehicles.

Internal Revenue Commissioner Mario Buñag said they have been conducting road shows all over the country to explain the mechanics of the new tax as well as distributing posters and pamphlets from Luzon "to the tip of Zamboanga."

Trade Secretary Peter Favila said his agency has been conducting daily, instead of weekly, inspections in 56 key public markets to monitor possible price manipulations.

Favila said yesterday’s inspection at the Muñoz market resulted in the confiscation of several rigged weighing scales and four store owners have been summoned for increasing their prices because of the EVAT.

The trade chief is urging the public to report any price violations to the agency and its 24-hour hotline 751-3330.

He and Vice President Noli de Castro will preside over the meeting on the National Price Coordinating Council tomorrow. — With Aurea Calica

Chief News Editor: Sol Jose Vanzi

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