Backtracking on EVAT

Despite pronouncements being made by palace spokespersons, there is no doubt that GMA’s administration no longer feels comfortable in implementing the now infamous Expanded Value Added Tax (EVAT) law. The imposition of an additional tax burden at this time, particularly on oil products and power, is now seen as politically and economically not manageable.

Even the Supreme Court has helped in postponing the implementation of the EVAT law by allowing the TRO it issued to stay pending finality of its decision confirming its constitutionality. Based on past records, the SC seldom gives petitioners leeway, but this time the petition for reconsideration filed at the last minute is being given due course and the TRO stays reportedly for another two or three weeks. Another reprieve for consumers fearfully awaiting the tax blows.

Scampering to undo harm

It’s not that I don’t welcome the latest moves of the government’s advisers and economic whiz kids to defer the implementation of the EVAT law. But if the Supreme Court will not cooperate, time is running out for them in trying to stop oil products and power rates from being slapped additional taxes.

Now, a very much chastened Rep. Joey Salceda is once again making the rounds, this time begging for support at both the Lower and Upper Houses to defer the 10-percent VAT on oil products and power rates. He has even sharply criticized the Department of Finance for its pronouncements to implementing the law as recently upheld by the Supreme Court.

Salceda and Sen. Mar Roxas have introduced bills in their respective houses to delay the implementation of VAT on oil prices and power rates. Roxas wants a moratorium for at least three months, while Salceda wants it postponed to July 2006.

This current situation is in stark contrast to Salceda’s threatening posture two years ago as he echoed the dire consequences of a fiscal crisis. Then, Congress was asked to work overtime to approve eight tax proposals, including the widening of the 10- percent VAT net to include oil products and power (but not telecommunication services), and its subsequent increase to 12 percent.

A heavy yoke

A government as heavily in debt as ours has manifested its latent insensitivity to the common people’s misery by pushing for more taxes as a way to pay outstanding arrears. No matter the administration’s arguments, the expanded VAT will hit, and hit hard on everyone.

The country’s creditors and the IMF and WB would have lauded and welcomed the higher tax collections, but this would inadvertently have broken the back of more Filipinos. Surely, if our countrymen were prepared to look the other way with regards the Hello Garci tape exposition, the burden of new taxes may entirely be a different story.

Reining the deficit without evat

The economy, having survived more than two "fiscal crisis" years without the EVAT law, could perhaps hurdle the government’s budget deficit problem without imposing the inflationary and socially insensitive oil products and power rate tax hikes.

This is exactly what New York-based research firm Bear Stearns said in a recent study, in effect noting that the Philippine government’s existing fiscal measures (without EVAT) reflect a budget deficit that is lower than the optimistic target of P150 billion for 2005. In fact, if implemented strictly and efficiently, the VAT law approved in 1988 and first expanded in 1996 to include professional fees, brokerage commissions, patent and copyright royalties and property transactions but still excluding oil products and power rates, would generate sufficient revenues to improve the deficit position.

Many lawyers, dentists, and doctors, and even individual businessmen have managed to evade the EVAT net, representing a collection opportunity loss of more than P25 billion. On the other hand, there is a high case of EVAT avoidance among businesses, estimated at P30 billion.

If the recent moves of the Bureau of Internal Revenue to tighten its collection efforts can be sustained and pushed more aggressively, then the EVAT can be subject to a "permanent restraining order," not just a TRO.

Debt quicksand

Discussions on the country’s budget deficit, however, are always linked to its debt problem, now estimated to be hovering the P4-trillion mark. The objective of generating more taxes was purportedly to reduce the budget deficit and eventually avert a fiscal crisis.

But it seems too late now in the game to use taxation as a measure to curb debt. Debt servicing, which is almost 90 percent of budget, is killing the country as less and less tax collections go to social services, i.e., education and health.

Our only hope is to confront our debtors and convince them to restructure or temporarily call a moratorium on debt payment to enable the country to use its resources to bring back the economy to a more stable footing. This has already been done by other countries like Argentina, Bolivia, Ecuador, Cuba, and Nigeria.

In the past, debt moratoriums were unacceptable options for developing countries. Today, the Paris Club composed of 400 transnational banks and the London Club with its 700 TNBs have been forced to recognize the cruel social realities of developing countries trapped in odious debts that at times had been incurred by repressive or corrupt leaderships, often with the blessing of the World Bank and/or the International Monetary Fund. Clearly, imposing more taxes on the Filipino nation would not solve the debt quicksand we are in now.

There are also other alternatives – grow the economy by not sapping it dry because of more taxes, cut government expenditures (reward congressmen with something else rather than junket trips), ruthlessly pursue tax evaders (put one big fish behind bars), crush corruption (put a relative behind bars), among others. But maybe not JDV’s debt equity swap which, according to my good columnist neighbor Boo Chanco, is only good as a press release.

Non-wager poker tournaments

In response to inquiries, the Poker Club of the Philippines announced that the club organizes tournaments, like the Poker King Challenge series, to promote poker not as a wager game but as a game of skills where one’s ability to calculate probabilities, to strategize, and to discern opponents’ reactions are tested. The tournaments also provide opportunities for poker players to experience actual competition as shown on television.

Many game enthusiasts consider poker as a mind game and a business game as well. To beat opponents and competitors, one cannot rely solely on luck just like in business. Winning requires good strategy, quick analysis of risk and rewards, and flexibility in reacting to competitors’ moves.

To ensure the integrity of the tournaments and compliance with gaming standards and decorum, the Poker Club of the Philippines has collaborated with the Philippine Gaming Corp. (Pagcor) to provide supervision, expert manpower, and logistics.

The 4th leg of the Poker King Challenge will be held on 24th and 25th September at Waterfront Hotel, Lapu-lapu City, and is limited to 120 poker players.

At stake during the competition are trophies and prize certificates with total value of over P100,000 from tournament sponsors, namely the Poker Club of the Philippines, Philippine Gaming Corp. (Pagcor), Jack Daniels, Miller Genuine Draft, Bicycle Playing Cards/Star Paper, Hyatt Hotel and Casino, Ralph’s Wine, and Internet knowledge-builder MyReviewerOnline.

Those interested to join may call the Manila Secretariat (c/o Cindy) at 817-9092 or visit www.PokerClubofthePhilippines.com for details.

Should you wish to share any insights, write me at Link Edge, 4th Floor, 156 Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at reygamboa@linkedge.biz. If you wish to view the previous columns, you may visit my website at http://bizlinks.linkedge.biz.