Senate open to higher VAT, junk food tax

MANILA, Philippines – The Senate is willing to consider increasing the 12 percent value added tax (VAT) and imposing a tax on junk food if asked by the incoming Duterte administration.

“We are open to that, we are willing to listen. That is the essence of taxation and democracy,” Senate President Franklin Drilon told ABS-CBN News Channel when asked about the two tax proposals of the next administration.

He said lawmakers should listen to “all quarters” on tax issues.

Duterte’s finance secretary-designate Carlos Dominguez has revealed plans to tax “obesity- and disease-causing” food products, including junk food.

He did not say what junk food he would like to tax.

On Monday, incoming budget secretary Benjamin Diokno said he has discussed with Dominguez his proposal to increase the VAT “up to a maximum of 15 percent.”

He said the timing of the VAT adjustment could be two years into the Duterte administration after income tax rates have been reduced.

Diokno belongs to a group of economists that has been advocating a combination of reduced income tax and a higher VAT.

The group reasons out that cutting income tax would give people more disposable income, which they can opt to save, rather than spend, to avoid a higher VAT.

Drilon also said the Duterte administration has to match the collection performance of Bureau of Internal Revenue (BIR) Commissioner Kim Henares.

 “Certainly, they cannot collect less. Revenues are the lifeblood of the nation,” he said.    

“The matter of tax administration is always an issue. Are we collecting the right taxes from the right people? In fairness to Kim Henares, she tried to enforce the tax law in its present form. Unfortunately, our justice system does not respond quickly to cases like this,” he said.

In a recent television interview, Henares said the BIR has filed 472 tax evasion cases with the Department of Justice (DOJ).

 “Some of these have been resolved and are now in court. A lot are still with the DOJ,” she lamented.

The Aquino administration has doubled revenue collections in five years since 2010, enabling it to also double the national budget and allocate more money for infrastructure and social services.

 “The highest (revenue) collection on record was in 2008 (during the Arroyo administration), at P778.6 billion,” Aquino has said.

“We needed only five years to match, surpass, and almost double our predecessor’s record high,” he said.