Ilocos Norte Gov. Imee Marcos said Sunday suspending the Value-Added Tax on basic commodities for one year will benefit a wider number of Filipinos at a faster pace”•instead of waiting for the suspension of the second tranche of the excise taxes next year.
“The suspension of the VAT would provide immediate relief to Filipino consumers, Marcos said.
“Given the magnitude of the prevailing tax rates, the temporary suspension of the VAT on basic necessities would be immediately felt by millions of Filipino families.
“Suspending the VAT on basic food items, fuel and electricity will directly counteract the strong inflation pressures on these goods.”
Marcos made her statement even as Senator Sherwin Gatchalian filed a resolution seeking to conduct an inquiry, in aid of legislation, on the potential impact of suspending the excise tax on fuel to ease inflation.
Gatchalian, who heads the Senate Committee on Economic Affairs, said he filed Senate Resolution 917 after President Rodrigo Duterte expressed his willingness to suspend the second tranche of the excise tax on fuel in 2019 to counter the effects of rising commodity prices.
Marcos, who is running for senator in next year’s midterm elections, noted how Ilocos and Davao were hardest hit by the recent inflationary pressures.
“My province has one of the highest inflation levels in the country and my provincemates are really struggling to make ends meet. We need immediate and meaningful relief from the national government,” Marcos said.
The Finance department says basic food items such as rice, fish, meat and vegetables have been the major drivers of inflation this year, with the contribution of rice alone rising 10 times to 1 percentage point of the inflation rate.
Data from the Philippine Statistics Agency showed that rice was the number one contributor to inflation in September 2018, and that food items in the consumption basket accounted for more than half of the inflation rate in the same month.
While the VAT revenues accounted for a fifth of the overall tax revenues, amounting to about P365 billion, Marcos said, the national government had the capacity to absorb the VAT revenue loss given the rising tax revenues with the Tax Reform for Acceleration and Inclusion Law.
“While collection efficiency has improved, there are still areas for improvement and taxes to be collected. If, for example, the income tax collection grows by at least 10 percent, the government is poised to earn P102 billion in 2018 and P113 billion in 2019,” Marcos said.
“That 10-percent growth rate in tax collections is even an underestimation given that our economic growth remains strong amid the high inflation, and the 2019 mid-term elections will spur economic activity.”
The TRAIN Law excise taxes will contribute P85 billion while running after tax evaders more vigilantly could add another P25 billion to compensate for the potential revenue loss if the VAT is suspended.
Marcos said government agencies must also increase their absorptive capacity, citing the projected P140 billion in spending deficit for the whole year. She also pushed for the abolition of the National Food Authority, which would add another P7 billion.
“These measures alone will result in P362 billion in revenues”•enough to compensate for the potential VAT revenue loss,” Marcos said.
“Since the VAT revenues can be covered by these measures, the numbers indicate strong evidence to justify the suspension of VAT.”
READ: No ifs or VAT: Marcos seeks tax freeze on food items, fuel
