DOF, BSP seek deferment of VAT on banks

The Executive Department, upon the recommendation of both the Department of Finance (DOF) and the Bangko Sentral ng Pilipinas, (BSP) will ask Congress to defer the collection of the value-added tax (VAT) on banks and financial institutions.

This was revealed over the weekend by both incoming Finance Secretary Jose T. Pardo and BSP Gov. Rafael B. Buenaventura.

Buenaventura said the imposition of the VAT on banks and financial institutions would result in an increase in the borrowing rates.

The VAT system, which had earlier been imposed on other industry sectors, was delayed for banks and financial institutions as the government worked out financial sector reforms that would ease other taxes currently imposed on banks such as the documentary stamp tax (DST) on financial transactions and the gross receipts tax (GRT).

Pardo and Buenaventura are pushing for a deferment of the collection of VAT on banks and financial institutions and extension for one year of the exemption of banks and financial institution from coverage of the new tax to give the government more time to come up with an alternative source of revenue.

Buenaventura said the BSP had discussed the matter with the Bankers Association of the Philippines (BAP) which appealed to the BSP to extend their exemption.

Pardo vowed he would try to work for a simpler taxation system.

Specifically, he said, he would work for the removal of the discretion of revenue collectors in determining taxes.

A proposed consumption tax, Pardo agreed, would be a form of alternative tax but, again, it would have to be further studied.