VAT bill not likely to pass before Congress’ March 18 recess

The Senate is not likely to pass the value added tax bill before it goes on recess this March 18 due to its failure to resolve several contentious issues.

An all-senator caucus held yesterday failed to accomplish its objective of resolving the contentious issues in the proposed VAT bill in order to shorten the debates during the sessions as the arguable provisions turned out to be more than what was expected.

Opposition Sen. Juan Ponce Enrile walked out of the caucus as he argued that the debates should still be held during the sessions where all points raised and answered will be put on record.

Enrile added that the multitude of issues the senators were raising during the caucus could not be tackled during the short meeting.

"It is crucial that all vagueness and ambiguities be clarified by the proponent," Enrile said while noting that there were several flaws in the terms used in the report of the Senate ways and means committee on the proposed bill.

As in previous interviews, Enrile expressed his opposition to the proposal to reduce or remove the excise and franchise taxes on certain sectors in exchange for the removal of their exemption from the VAT.

Enrile also questioned the assumptions made by Recto on the revenue potential of his version of the VAT bill.

According to Recto, his bill would raise a total of P66.1 billion in new revenues just removing the exemptions of almost all sectors.

However, Enrile said the experts he consulted could only come up with a total of P26 billion at 100-percent efficiency in tax collections.

Sen. Miriam Defensor Santiago expressed her opposition to the proposed VAT on petroleum and power because of its anticipated impact on consumers.

"Under this Senate version, sales of electricity by generation companies, transmission and distribution companies shall now be subjected to VAT. This price increase will take place together with a new tax which the law euphemistically calls universal charge. That’s the double whammy," Santiago said.

"The ordinary household consumer would be the worst affected by this imposition of VAT. Unlike the manufacturing sector, they will not be able to use this as input VAT which they could deduct from their output VAT liabilities," she added.

Senate Majority Leader Francis Pangilinan said another all-senator caucus will be held during lunch today to try and settle the issues again.

Pangilinan said the issues were basically confined to the question on who will be included and exempted from the VAT chain, which is the essence of the Recto version.

He said there was a consensus among the senators to leave the VAT at its present rate of 10 percent, contrary to the Department of Finance and House of Representatives’ proposals to raise it to 12 percent.

Pangilinan said they have invited representatives from the DOF and the Bureau of Internal Revenue to sit in the caucus today in order to help clarify the issues being raised by his colleagues.

Pangilinan agreed with Enrile that the debates should still take place during the sessions in order to put all of the points raised on record.

He admitted that the VAT bill is a very complicated law that will inevitably be subjected to various interpretations if and when it is passed.

Senate Minority Leader Aquilino Pimentel Jr. for his part said that he does not expect the bill to be passed before Friday based on the results of the caucus and the time left before the recess.

"I am doubtful that we will pass the bill in due time," Pimentel said.

Senate President Franklin Drilon and Sen. Juan Flavier, remained optimistic that the caucus today will provide positive results and that the bill will be passed soon.

"We will continue to discuss the contentious points. We will examine each and every provision to make it as equitable as possible," Drilon said.

"We will keep on working until we pass it. It is not an easy measure," he added.

President Arroyo has repeatedly called on Congress to pass the VAT bill immediately as an integral part of her administration’s efforts to avert a fiscal crisis.

The VAT bill is considered the most important of the eight revenue measures introduced by the President to raise P80 billion for the government.

Based on the projections, the government needs only P55 billion more in new revenues since P25 billion is already expected to be generated with the passage of the bill on sin taxes and lateral attrition.