Foreign envoy: EVAT suspension weakens investors' confidence

The suspension of the expanded value added tax (eVat) has weakened the confidence of the foreign investment community, as foreign capitalists see a stronger economic performance in the Philippines if the eVat is eventually pursued.

"It's unfortunate the eVat is temporarily postponed. The new eVat is seen to help the Philippines fiscal situation," said Canadian ambassador to the Philippines Peter Sutherland.

The ambassador said that as soon as the Arroyo administration would be saved from the current political war, there is a big possibility that economic prospects in the country will strengthen, thereby inviting more foreign capitalists to invest in the country.

Sutherland said the Arroyo administration has been able to bring down the country's huge deficit, and good tax collection system has sent positive impression to the foreign investment community, but its just unfortunate that these efforts are intervened by some sectors in the Philippine society.

While a lot of Filipinos are not in favor of the implementation of eVat, as it could bring up all prices of commodities and services, coupled with the expensive oil price in the world market, Sutherland said the new eVat law is seen to save the drowning situation of the Philippines from huge deficit.

He said that the current administration is on the right track of strengthening the economic fundamentals in the country, but the political squabble has interrupted the Philippines' upward economic movement.

"A lot of investors are looking closely at the political situation in your country. They are again adopting the wait and see attitude, as business people dislike uncertainties," Sutherland said.

In Canada for instance, he mentioned that there are a number of investors looking at the Philippines as investment site, especially for mining and power exploration.

However, these investors are still monitoring the current political situation in the country.

On the other hand, economist Cayetano Paderanga said in a recent midyear economic briefing in Cebu, he said that the impact of the eVAT's temporary restraining order (TRO) has deterred the deficit program of the government to "off-track" situation.

Also, the eVAT TRO has brought about daily revenue loss of P130 million or P4-5 billion a month.

However, Paderanga put confidence on Arroyo's pronouncement during the recent State of the Nation Address (SONA) which the President said "The administration will not waver in (its) commitment to economic reform and fiscal discipline whatever the political cost."

While the implementation of new eVAT sends positive outlook to foreign capitalists and economic experts, majority of Filipinos are anticipating for more difficult financial situation, as companies are bound to pass on the added cost of eVAT to consumers.

VAT is a tax on consumption levied from 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.