Palace: GMA ready to sign amended VAT law

President Arroyo is ready to sign into law the bill removing the cap on the amount of input value-added tax that can be credited against the output VAT by industries, Malacañang said yesterday.

Presidential Political Adviser Gabriel Claudio said the Office of the President had received the enrolled copy of the bill and a formal signing ceremony would be set soon.

Aside from the VAT measure, Mrs. Arroyo will also sign the bill creating the rank of first chief master sergeant in the Armed Forces of the Philippines.

The Senate adopted House Bill No. 5742 on VAT changes without amendments.

House Deputy Speaker Eric Singson, one of the principal authors of the approved House version, said the elimination of the cap on input VAT would significantly reduce the administrative difficulties in the implementation of the VAT law under Republic Act 9337.

RA 9337, Singson said, set an input VAT limit of 70 percent of the output VAT. The scheme stunted instead of encouraged economic activity in the country, lawmakers said.

"This amendment is a pro-people and pro-business legislation, which restores the neutrality of the VAT system. It will also encourage more economic activity as businesses will no longer limit or discourage the purchase and buildup of their inventories just to avoid being subjected to the cap," Singson said.

Speaker Jose de Venecia Jr., one of the principal proponents of RA 9337, said the amendatory measure "only shows the determination of Congress to fine-tune the VAT law which helped elevate the country’s financial stability." Mrs. Arroyo earlier certified the measure as urgent.

Under the Reformed VAT law, the maximum amount of input VAT credits that businesses may claim for a given tax period should only be 70 percent of its output VAT.

Input VAT is the amount shouldered by a business whenever it purchases goods or services that were already slapped the 12-percent VAT. Output VAT, on the other hand, is the sales tax a business has to remit to the government at 12 percent of its gross sales.

Businessmen complain that if at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the VAT-registered entity.

If the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or quarters.

The scrapping of the 70-percent cap may help the government improve its collection with the likelihood of higher sales from companies, which have been managing their inventories to avoid hitting the cap, officials said.

The bill creating the rank of first chief master sergeant, on the other hand, aims to further professionalize the armed forces.

It says career development and promotion systems should be established to ensure career progression of all personnel of the AFP and provide them with appropriate career motivations.