Business sector seeks cut on 70% input tax

While the implementation of the "controversial" expanded value added tax (eVat) is suspended, the business sector expresses its fear of bankruptcy especially the small and medium entrepreneurs (SMEs).

Cebu Chamber of Commerce and Industry (CCCI) president Robert Go told Bureau of Internal Revenue (BIR) commissioner Guillermo C. Parayno Jr., during his visit over the weekend, to possibly adjust the 70 percent input tax, otherwise majority of companies in the SME sector are expected to collapse with the very thin profit margin brought about by the global competition.

Under the new eVAT law, companies are required to pay tax to the government before the imported goods shall be released.

Input tax means the VAT due or paid by a VAT-registered person or importation of goods or local purchases of goods, properties, or services, including lease or use of properties, in the course of his trade or business.

Go said that although the private sector is supportive of the implementation of eVAT, he feared that details of the law, which requires companies additional tax payment to the government shall result to unprofitability that may force some companies to fold up.

"After the law was signed we were shocked to know of the 70 percent cap of the input tax. Too many businesses are now suffering from thin profit margin because of competition," Go told officials of the BIR led by Parayno.

Go who is also a retailer, who owns the Prince Warehouse Club chain, said that the retail industry is currently hard hit by too many imported supplies around and is sold in a very affordable rate, which lessens the profit margin of the retailers.

Most of the retailers, Go said only sustains at a maximum of 1.5 percent margin, if the input tax cap of 70 percent shall be officially implemented, more and more businesses will suffer.

However, Parayno assured that while the eVAT is under suspension there is a possibility that the input tax will be adjusted, and it may go down to 90 percent. Previously the cap of input tax is 100 percent.

When the Supreme Court (SC) released the Temporary Restraining Order (TRO) of the eVAT on Friday night last week, Parayno and some BIR officials were here in Cebu to supposedly brief regional BIR officials on the implementation of the law.

"This (TRO) comes just as we are ready to jump-off the implementation vigorously in the country," Parayno said during the supposedly eVAT briefing in Cebu, which turned out as Consultative Meeting for eVAT, attended by different sectors in the society in Cebu.

In a separate interview, Bobit Avila, whose family owns Oriente Theater in the downtown district said the implementation of eVAT poses danger to the movie theater industry.

Currently, the movie houses are suffering from decline volume of clientele due to the existence of cheap pirated DVDs, or VCDs, and operators cannot afford to increase their ticket charges anymore.

Cebu Association of Tour Operators (CATO) president Alice Quiblatin said travelers will be to brace up as travel expenses will have to shoot up due to adjustment from transportation companies, such as airlines, among others.

VAT is a tax on consumption levied on the sale, barter, exchange or lease of goods or properties and services in the Philippines and on importation of goods into the Philippines. The seller is the one statutorily liable for the payment of the tax but the amount of the tax’ may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services.

Parayno which expressed disappointments on the eVAT TRO, said BIR had already set a target of collecting P28 billion in the next five months (supposedly) derived from the eVAT implementation, P12 billion of which can be collected from the petroleum industry.