OPPOSITION lawmakers on Sunday rejected a Palace proposal to increase the value-added tax from 12 percent to 14 percent, saying this would defeat the purpose of providing relief to ordinary workers by lowering their income taxes.
Finance officials earlier suggested increasing the VAT to offset lost government revenues from a lowering of income tax rates that Congress is pushing.
But Leyte Rep. Ferdinand Martin Romualdez said any revenue losses would be minimal and could be offset by a more aggressive campaign against tax cheats and smugglers.
“If the government will focus on apprehending big-time smugglers, the possible loss of revenue as an offshoot of lowering income taxes will be addressed,” Romualdez said.
Valenzuela Rep. Sherwin Gatchalian also rejected raising the VAT on products and services.
“Increasing the VAT rate will definitely have a negative effect on the purchasing power of the poor, who are always the first to bear the brunt of price hikes of basic commodities and utilities,” Gatchalian said.
Gatchalian slammed as “anti-poor” the Finance Department proposal to use a higher VAT rate to offset losses from lower income taxes.
“The reduction in the income tax rates will not be felt by the poor because their incomes are already exempted from taxation,” he said. “The poor, however, will be adversely affected by an increase in the VAT rate.”
He added that under the Finance Department plan, the poor would be forced to allocate a greater proportion of their already meager incomes on utilities, fuel and other basic goods and services.
Earlier, President Benigno Aquino III rejected proposals to lower the income tax rate, saying this would jeopardize the country’s credit rating with international rating agencies.
Finance officials added that a law lowering income tax rates could result in government losses of P30 billion in the first year of its implementation.
The proponent of lower taxes in the Senate, Senator Juan Edgardo Angara, said the government should put the interest of Filipinos first instead of focusing on generating more revenue.
He added that the government had the fiscal capacity to grant lower taxes, considering it is seeking a budget increase for the Finance Department that is bigger than the expected P30 billion in projected revenue losses.
“It would appear that these agencies have been asking for a 224-percent increase in their budget. If they believe the government is capable of giving them these huge funds, there is no reason why they cannot accede to the appeal for lower taxes,” Angara said.
But Senate President Pro Tempore Ralph Recto said any lowering of taxes will not happen before the end of the year.
He added, however, that members of Congress are generally supportive of proposals to reduce the burden on four million to five million taxpayers.
A militant labor group on Sunday called on other allied organizations to rally behind the proposed lowering of income tax rates by Marikina Rep. Miro Quimbo and Angara.
“The proposed tax exemptions would result into a much-needed increase in take-home pay for wage and salaried workers who earn more than the atrociously-low minimum wage and are not covered by the orders of the regional wage boards since their creation in 1989,” the BMP said in a statement.
It added that it was “the height of injustice” for the government to grant billions in tax breaks and incentives to multinational companies but refuse to grant workers tax relief.
The group also blasted the Aquino administration for having “the gall to complain” about P30 billion in lost revenues.
“The proposals would not cause a big loss in the tax base for the Bureau of Internal Revenue since the increase in take-home pay will spur consumption and increase the collections for the value-added tax,” Leody De Guzman, BMP chairman, said.
De Guzman said the proposals in Congress were a step towards the reform of the regressive taxation system, which operates under the principle: “those who have less in life should have more in taxes.”
Under the present structure, the tax burden is carried more by workers whose wages have automatic deductions for withholding taxes than by corporations that have access to various legal means of tax avoidance, he said.
The group added that workers deserve a reprieve from almost six years of hardship under President Aquino.
“As long as billions of state funds are lost to corruption, taxpayers—especially the working class who are the most tax-compliant sector of Philippine society—have every right and reason to call for less taxes, or even for a tax revolt,” De Guzman said. With Sandy Araneta