P19.9-billion collection shortfall seen due to 'negative revenue measures'

MANILA, Philippines - The government won’t be able to earn a single centavo from the reformed value added tax (RVAT) this year and in 2010 if pending legislative measures that threaten to erode revenues are approved by Congress, according to the latest estimates from the Department of Finance (DOF).

From a projected P76 billion this year from RVAT, the government expects to incur a shortfall in its RVAT collection by P19.9 billion if the measures hurdle deliberations in Congress. 

In 2010, the government expects to incur a shortfall in RVAT collections by P17 billion from the projected P78.9 billion for next year.

This as the government expects losses of roughly P49.5 billion a year from nine measures pending in Congress.

These measures include the bill seeking the creation of special economic zones in Bataan, Ilocos Sur, Cebu, Davao and Samal (revenue loss of P15 billion); the bill reducing the National Government’s share from royalties from indigenous energy sources to effect a reduction in electricity rates (revenue loss of P14.9 billion); the bill seeking to reimpose franchise tax on power distribution (revenue loss of P7.1 billion) and the bill seeking to exempt from income and other taxes the so-called Real Estate Investment Trust (P5.3 billion).

Other “negative revenue measures” include the proposal to exempt hybrid vehicles from excise tax and VAT which is expected to translate to losses of P2.7 billion, the abolition of premium tax on life insurance policies which has an estimated revenue loss of P1.8 billion and the abolition of documentary stamp tax on dollar remittances from overseas Filipinos which has a projected loss of P1 billion. 

The proposal to provide incentives to the Home Development Mutual Fund or PAG-IBIG Fund is expected to result in losses of P900 million while the abolition of DST on life insurance policies is expected to result in revenue losses of P800 million.

The RVAT law, passed in 2005, raised the sales tax to 12 percent from 10 percent and lifted exemptions on oil and petroleum products.

The new VAT law also increased the minimum corporate income tax to 35 percent from 32 percent, but this has been reduced to 30 percent this year.

In 2008, the government raised P121.14 billion from the RVAT law or P32.21 billion higher than the P88.93 billion collected in 2007.

The government was counting on VAT to wipe out the deficit but this has not been successful alongside the general slowdown in the economy, poor tax collections, smuggling and rampant corruption in the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC).