GMA to sign VAT law this week

President Arroyo said yesterday she will sign into law the "much-needed" value-added tax bill this week and raise the VAT rate to 12 percent in January next year.

In her speech before officials and employees of the Bureau of Internal Revenue (BIR) at the agency’s main office in Quezon City, the President said the improved revenue collection and implementation of the new tax laws would enable the government to achieve a balanced budget by 2010 or even earlier.

"The implementation of the 12 percent tax provision in January 2006 will depend on the BIR’s ability to demonstrate efficient VAT collection at 2.8 percent of gross domestic product (GDP)," Mrs. Arroyo said.

She added that the Alcohol, Cigarette and Tobacco Tax, the Lateral Attrition Law and the VAT Law are expected to generate P80 billion this year and over P120 billion next year, an amount "greater" than what she had promised earlier.

She said the government beat last year’s target when the fiscal deficit reached only 2.8 percent of GDP, lower than the predicted 4.2 percent. This year, the deficit target is 3.8 percent of GDP, she said.

"We now have significant results to show our earnestness about our fiscal reform program. Let me say to the business community: believe in the Philippines," Mrs. Arroyo said.

The President earlier said she would exercise her authority to raise the VAT rate to 12 percent but not before going after big-time tax cheats, cutting wasteful spending and attracting investments to raise more revenues.

She said she would exercise her standby authority with "prudence and decisiveness." She also expressed confidence that the VAT would pass constitutional muster if its critics choose to question the law before the Supreme Court.

Mrs. Arroyo also noted that the BIR had achieved its highest-ever monthly collection of P62.9 billion in April, which is P9.9 billion higher than the collection for the same period last year. The collection also exceeded by some P200 million the target for April, which had been pegged at only P62.7 billion.

She said the BIR’s various programs, including Run After Tax Evaders (RATE), the Revenue Integrity Protection Service (RIPS) and other improvements in auditing and information technology, as well as the dedicated performance of its personnel, had contributed to the increased collection.

"For the first time in Philippine history you see initiatives that are aggressive, consistent and have started to strike fear among cheaters," she said.

Despite criticisms from some sectors, she said she remains committed to fighting tax evasion and corruption. — Paolo Romero