, November 16, 2005
(STAR) By Paolo Romero - President Arroyo called on her detractors yesterday to stop criticizing the expanded value-added tax (EVAT) law as recent economic developments have proven her right in implementing fiscal reform measures.

In a speech at the 49th founding anniversary of Carmen town in North Cotabato, the President said the people are now "tired of the antics of destabilizers" and want peace and prosperity to prevail in the country.

"Now we can see very early the fruits of confidence in our economic reforms," Mrs. Arroyo said. "Our peso is strengthening and will strengthen further because our overseas Filipino workers are enthusiastic in sending remittances."

"The opposition has said that once we implement the EVAT, the price of gasoline and diesel will shoot up but that did not come true… and this is no coincidence but providential because of our implementation of tax reforms," the President said.

The EVAT is the centerpiece of the Arroyo administration’s fiscal reform program aimed at wiping out the deficit and balancing the budget by 2009. The government aims to raise P80 billion to P120 billion from EVAT next year when the President raises the rate from 10 percent to 12 percent.

Malacañang has consistently rejected calls to defer implementation of the EVAT on oil and power or to postpone the two-percent rate increase.

Administration and opposition lawmakers, however, including Albay Rep. Joey Salceda, one of Mrs. Arroyo’s closest economic advisers, have not let up in their calls to postpone the implementation of the EVAT on oil and power.

Opposition lawmakers in the House of Representatives said it was too early to say that EVAT will help the greater number of Filipinos because revenue from the expanded tax has not yet materialized.

"Not a cent from the EVAT has been remitted to the national treasury," Minority Leader Francis Escudero had said Monday, adding it has only been a fortnight since the law was implemented.

Bayan Muna Rep. Teddy Casiño said the Palace celebration was premature because the full brunt of the EVAT would be felt after the Christmas holidays.

"The real and full impact of the EVAT may not be felt yet until the end of the holiday season," he said.

Casiño also said the Palace was too eager to take credit in its "propaganda offensive," and that the President may only find herself reversing her statements yet again.

The President said fuel prices have gone down to levels approaching those before the EVAT’s implementation. "We are seeing more relief for our transportation sector," she said.

Remittances for the first 10 months of the year also reached $10 billion, which is larger than the total remittances in 2004.

Mrs. Arroyo noted that peace and prosperity have also returned to Carmen, which rose from a sixth to first-class municipality and was able to undertake infrastructure projects without resorting to borrowing.

The President said the EVAT would also help reduce the government’s dependence on borrowing for its socio-economic and infrastructure projects.

"I hope the day would come when the Philippines would spend for infrastructure and social services without having to rely on borrowings. That’s why these economic and fiscal reforms are important," Mrs. Arroyo said.

Press Secretary Ignacio Bunye earlier said that pessimists who had predicted all sorts of doomsday scenarios once the EVAT was implemented had been proven wrong.

Bunye said the country’s economy "has never been as buoyant" and prices of basic commodities have remained stable despite the EVAT.

"We have proven wrong the speculations of doomsayers and defeatists on the effects of the EVAT," Bunye said.

Since the lifting of the temporary restraining order on the implementation of the EVAT by the Supreme Court on Oct. 18, the government has repeatedly urged the public and its political detractors to give the new tax law a chance.

Braving a political backlash and despite the President’s low popularity ratings, Malacañang has pushed for its full implementation, saying the rapid rise in prices of basic commodities being peddled by the opposition will not happen as mitigating measures are in place to cushion the EVAT’s impact.

One of these measures is the scrapping of excise taxes and the reduction of import duties on oil products. Thus, the Department of Energy had said that with the removal of the 30-centavo per liter excise tax and the nine-centavo per liter import duty, the effect of EVAT on fuel prices should be no more than 6.5 percent.

Last Oct. 31, oil firms reduced fuel prices by an average of 75 to 80 centavos per liter due to the softening of oil prices in the world market.

The price cut has somewhat eased the impact of the full implementation of EVAT. Further cuts in petroleum prices are expected in the next few months because of the softening of world crude prices.

The government has maintained that raw agricultural products will remain VAT-exempt while other socially sensitive goods will be strictly monitored by government agencies. The Department of Trade and Industry has been monitoring prices of basic commodities in public markets all over the country.

On the first trading day after the EVAT was implemented on Nov. 1, a non-working holiday, the peso closed at a five-month high while stocks surged to a three-month high.

The rally was partly in anticipation that the new tax would shore up government finances and reduce the deficit to more manageable levels.

In a report, the World Bank had said that sustained implementation of fiscal and economic reforms could help the Philippines catch up with its neighbors.

What the government is anticipating, as a result of the EVAT’s implementation aside from fiscal stability, is an upgrading of the country’s sovereign credit rating.

The business community, however, warned that proceeds of the EVAT should be used by the government as promised for socio-economic projects and in reducing the budget deficit.

At the height of street protests against the EVAT, Malacañang had announced that additional revenues would be allocated to education, health and infrastructure projects.

Chief News Editor: Sol Jose Vanzi

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