MANILA, Philippines – The chairman of the House committee on ways and means has asked President Aquino to certify as urgent his bill on reducing the 12-percent value added tax (VAT) to six percent.
In a letter to the President, Batangas Rep. Hermilando Mandanas said his VAT reduction bill would give meaning to Mr. Aquino’s election campaign slogan, “Kung walang corrupt, walang mahirap.”
He said his proposal, which would rename VAT as value simplified tax or VAST, “will encourage the bayanihan spirit of sharing and engender an equitable distribution of the tax burden between the private sector and the public consumer.”
He said the VAST bill is the House of Representatives’ contribution to the administration’s effort to cut the budget deficit.
“The VAST measure sends a concrete and clear message that the Aquino administration is sensitive to the needs of the ordinary Filipino taxpayer by reducing their direct tax burden,” Mandanas stressed.
He pointed out that the primary feature of the VAST is the removal of the input tax credit system, under which manufacturers, producers, wholesalers, distributions, traders, and retailers can claim VAT deductions and pass the tax on to buyers of their products or services.
Mandanas said the system gives tax collectors the discretion on which deductible expenses to allow, giving rise to corruption.
“The VAST will reduce graft and corruption which was perpetuated by the complicated system and paperwork under the input tax credit system, which is vulnerable to corruption with the use of fake or re-cycled receipts, repeated tax credit claims, or the understatement of sales, and is exacerbated by weak, inefficient and ineffective monitoring and auditing,” he said.
He projected that with the elimination of occasions for corruption and with more people paying the value simplified levy, the government would have P50 billion more in revenues.
“The VAST will potentially generate an incremental revenue of not less than P50 billion with both the private sector and the end-consumer sharing the burden of paying the tax,” he said.