Palace rejects proposed VAT suspension on basic commodities

MANILA, Philippines – Malacañang rejected yesterday calls to suspend the 12-percent value added tax (VAT) on basic commodities to bring down the prices of food.

“Many other problems will escalate when (the value-added tax) is scrapped,” said deputy presidential spokesperson Anthony Golez.

“That will definitely affect and make the poor sector of our country suffer even more. We will be seeing a domino effect. Government funds that are used for the delivery of basic services like medicine, subsidies and education will be hampered as well, generating more discontent among our people.”

President Arroyo had previously rejected proposals to tinker with the VAT, particularly on oil, when it was raised several months back.

“It will hit government revenues, the budget deficit will go up, we won’t be able to invest in infrastructure and investors won’t come in,” she said.

“Because the revenues of the government will go down, we will have a budget deficit, interest rates would go up again, the peso will weaken and consequently, the prices of goods will go up. So it will not help in bringing down the cost of goods.”

However, Speaker Prospero Nograles said suspending the EVAT could cushion the impact of increasing prices of rice and goods on the masses.

“A temporary suspension of EVAT coverage on food products is worth studying even on a temporary basis if we can have the assurance that this will bring down the cost of food in the market,” he said.

Nograles said the House of Representatives will give priority to a bill seeking to expand personal tax exemptions granted to employees in the private and public sectors.

“We have to look for ways to increase the take-home pay of ordinary workers, especially the minimum wage earners, by reducing their taxable income which comes in the wake of efforts to increase wages of workers through the Regional Wage Boards,” he said.

However, Nograles said any move to remove the EVAT could adversely affect government revenues and cripple vital government socio-economic and infrastructure programs for economic growth.

“Without EVAT, we won’t have funds to subsidize food, medicine, farm inputs, etcetera,” he said.

“What we should do instead is to prioritize the approval of the proposal to widen the personal exemption base for workers in the private and public sector.”

Nograles said the original VAT law saved the country from economic collapse triggered by the Asian financial crisis that wrecked many stronger economies of Asia like Thailand.

“The VAT system saved the country from financial hemorrhage and put us back on track to recovery,” he said.

“Scrapping it at this time is nothing but political posturing that can be fatal to the economy and the people.”

The EVAT on some food products should be suspended until after the country has hurdled the present food problem, Nograles said. – With Delon Porcalla, Jose Miguel Reyes