Pimentel, 6 minority senators to question VAT Law before SC

The Senate minority is set to formally question the constitutionality of the standby authority given by Congress to President Arroyo allowing her to raise the value-added tax (VAT) rate before the Supreme Court next week.

A party-list group in the House of Representatives has already petitioned the Supreme Court, questioning the VAT law’s legality.

Senate Minority Leader Aquilino Pimentel Jr. said that seven of the nine members of the minority will file the petition to prevent the implementation of what is considered the most controversial provision of the VAT bill, which was signed into law by the President last Tuesday.

"We’re going to file a petition to question the VAT and that will probably indicate to you who are considered to be the legitimate members of the minority or the opposition," said Pimentel, who was obviously taking a shot at two of his colleagues in the minority.

The seven senators who will file the petition are Pimentel, Sergio Osmeña III, Ma. Ana Consuelo Madrigal, Jinggoy Estrada, Luisa Ejercito, Alfredo Lim and Panfilo Lacson.

Senators Juan Ponce Enrile and Edgardo Angara, who have been at odds with the minority bloc, were not included among the signatories of the petition.

The petition will question the authority given to the President to raise the VAT rate by two percentage points by January next year if two conditions are met.

Under the bill, Mrs. Arroyo may hike the rate if the VAT collection as a percentage of the gross domestic product exceeds 2.8 percent and/or if the national government deficit exceeds 1.5 percent of GDP.

Gross domestic product is total value of goods and services produced within a country in a year, minus net income from investments in other countries.

Critics of the provision have stated that the increase will definitely take place next year since both conditions have already been met at this time.

Pimentel explained that the authority to raise taxes is clearly invested in Congress by the Constitution and that the President is only allowed to raise tariffs.

"No amount of authority emanating from Congress can invest the President with a constitutional power to raise taxes. VAT is a tax. Under the Constitution, the President has the power to adjust tariff rates. There’s a reason for that because goods from all over the world enter our country day to day," Pimentel said.

"We maintain that even with the conditions attached to that standby authority, even those conditions can’t cure the constitutional infirmity of that grant of power because it can’t be done," he added.

Pimentel said that the seven members of the minority have been in constant consultation over the petition and would file their petition before the Supreme Court next week.

Questions on the legality of the standby authority provision of the VAT bill could prevent implementation of the two-percent increase next year.

Osmeña previously said that Mrs. Arroyo cannot exercise her authority to raise the VAT rate until the Supreme Court comes out with a ruling.

A two-percent increase in the VAT rate is expected to raise as much as P145 billion in revenues for the government, a significant portion of which will be used to cover the country’s huge fiscal deficit.

Malacañang had pushed for a 12-percent VAT rate from the very start. But the Senate stood firm on keeping the rate at 10 percent, prompting a compromise by Congress involving the granting of the standby authority to the President.

Pimentel and his colleagues oppose the VAT, saying improving tax collection by cracking the whip on the Bureau of Internal Revenue and the Bureau of Customs would make new taxes unnecessary.

"The smiling face of the President and her allies at the signing of the VAT law the other day rubbed salt into the economic wounds that they have insensitively inflicted upon the people by the inevitable rise in the people’s misery index the new tax law will bring about," he said.

Pimentel said finance department officials themselves found out that about P150 billion in VAT is uncollected every year due to collection gaps and weaknesses in tax administration.

In its petition to the Supreme Court, the party-list group Abakada Guro said the new tax law constituted an abandonment by Congress of its exclusive authority to impose taxes. — With Mike Frialde