SC asked to stop EVAT law implementation

Opposition congressmen led by House Minority Leader Francis Joseph Escudero asked the Supreme Court yesterday to stop the implementation of Republic Act 9337, or the Expanded Value-Added Tax (EVAT) law, calling it unconstitutional.

RA 9337, which was signed into law by President Arroyo on May 24, 2005, takes effect today.

Escudero said the new VAT law contains provisions that are totally alien to its original purpose and violates the Constitution, including, among other things, a provision which grants Executive Secretary Eduardo Ermita the authority to carry out functions of the Office of the President.

The congressmen also expressed concern over the serious effect of the EVAT on the people such as the "passing on of the VAT incidental to the sale of electricity and petroleum products."

Escudero said that, although taxation is indispensable for the survival of the state, it is a requirement in all democratic societies that the power to tax be exercised reasonably.

Malacañang, however, expressed confidence in the legality of the VAT law which was passed to increase government revenues.

Presidential political adviser Gabriel Claudio said the move by the 17 minority members of the House of Representatives came as no surprise.

"The opposition is being true to form, (its members) are extending political warfare even to the economic front," Claudio said.

Press Secretary Ignacio Bunye also brushed aside the bid to nullify the EVAT law and said it was just part of the legal process.

"I believe on the whole what will be beneficial is the implementation of the law, which will put our fiscal house in order," he said. "There are sacrifices that we have to make, painful but necessary."

No To Tax Revolt

Finance Secretary Cesar Purisima said the Department of Finance (DOF) will start implementing the VAT today as scheduled and warned against calls for a tax revolt, saying the Bureau of Internal Revenue could charge individuals for tax evasion if they fail to pay their taxes.

Finance officials also warned that the government intends to come down hard on businesses that raise prices on basic commodities using the VAT as an excuse.

According to Finance Undersecretary Emmanuel Bonoan, it is illegal for courts to prevent the government from implementing its tax laws. The proper way is to pay the tax under protest and then sue for a refund through the court of tax appeals.

"Anyone who would refuse to pay their taxes for whatever political statement they want to make could be held liable for tax evasion," he said. "The important thing to know here is that the prescription period for such charges is 10 years. This means that 10 years down the road or long after the administration has changed, the person will still have tax problems."

Bonoan also explained that under the law, courts could not issue an injunction against a tax measure since the state had the inviolable right to impose taxes on citizens in order to support itself.

He added that the Constitution allowed Congress to delegate its power to impose taxes, which means that allowing the President to adjust the VAT rate in 2006 was within the tenets of existing jurisprudence.

Mitigating Measures

In a joint statement, the DOF and the Department of Trade and Industry assured the public yesterday that the government was exerting all efforts to mitigate the impact of VAT on consumer goods.

The mitigating measures, Purisima said, were mostly aimed at offsetting the impact of the 10-percent VAT on oil and petroleum products which were previously exempted from the tax.

The Department of Energy explained that measures are in place so that the expected increase in fuel prices will be minimal.

Energy Secretary Raphael Lotilla said local pump prices would rise only by an average of six percent instead of 10 percent due to the scrapping of excise taxes and the reduction of import duties on oil products.

More specifically, the EVAT will raise diesel prices by 1.9 percent to P29.50 or 55 centavos more from P28.95 per liter. Kerosene, used for lighting and cooking by marginal and urban dwellers, will increase by 5.9 percent or P1.73 per liter.

For fuel oil, used mainly for power generation, the new VAT will result in a 6.5-percent hike equivalent to P1.20 per liter. Regular unleaded gasoline will increase by 6.8 percent or about P2 per liter. Liquefied petroleum gas or LPG, used by households for cooking, will increase by 7.7 percent or P29.87 per 11-kilogram cylinder, bringing the retail price to P416.87 from P387.

Lotilla said that the highest impact of EVAT will be on unleaded gasoline with pump prices rising 8.6 percent or P2.60 per liter to P33.03 from P30.43 per liter.

Purisima emphasized, however, that prices on basic and unprocessed commodities should not go up at all because they continue to enjoy VAT exemption.

But big transport organizations yesterday denounced the implementation of the EVAT law on toll fees, saying it will be an additional burden on commuters.

This means that the cost of transporting commodities from the provinces to Manila will also go up due to the added cost of transportation, the groups said.

The Tollway Association of the Philippines clarified, however, that they were not raising toll rates but only following the government’s order to implement a 10-percent VAT on the existing rates.

VAT will be collected from tolls paid at the North Luzon Expressway, the Manila-Cavite Toll Expressway, the Skyway System, the South Luzon Tollway and the Star Tollway. — Jose Rodel Clapano, Aurea Calica, Des Ferriols, Rocel Felix, Paolo Romero, Sandy Araneta