JDV confident bicam can pass VAT bill in 10-12 days

DAGUPAN CITY — Speaker Jose de Venecia is optimistic that senators and congressmen in the bicameral conference committee can agree on a final version of the value-added tax (VAT) bill after 10 to 12 days of constant negotiations.

"We need a series of meetings with the senators and we will appeal to their statesmanship," De Venecia said.

"We will move to the center to come out with a creative compromise that will maximize the revenue yield for the government while providing the maximum safety nets for our people. That is now the creative task on how to bring that about," he said.

De Venecia had previously warned that the country will suffer a financial crash within 18 months, just like what happened to Argentina, if Congress fails to pass the Malacañang-sponsored value-added tax bill.

"If this VAT bill doesn’t pass, and we will have a financial crash within 18 months, it will be the poor people who will really suffer because the rich can always take care of themselves, " he told reporters here on Saturday.

"We cannot be dependent forever on constant, habitual borrowing when we can dramatically reduce our foreign borrowing and we are able to finance our own requirements with revenue measures."

However, De Venecia said the House of Representatives has put a lot of safety nets on the poor man’s basic daily needs like pan de sal, sardines, and noodles in coming out with its version of the bill.

The House version has the overwhelming support of the business community, almost all the chambers of commerce, the international community, the international banks, the diplomatic community, President Arroyo’s economic team, and the President herself, he added.

Meanwhile Tarlac Rep. Jesli Lapus said yesterday the Joint Foreign Chambers of Commerce in the Philippines has rejected a Senate bill seeking to increase the minimum corporate income tax rate from 32 to 35 percent.

"The Senate proposal is the opposite of the Asian regional and worldwide trend to lower corporate income tax," he quoted the foreign chamber of commerce as saying.

Lapus, House ways and means committee chairman, said the foreign chambers of commerce believes that the Philippines has the highest corporate income tax within ASEAN and raising it would only encourage tax avoidance and make the country less competitive with its neighbors.

"As a capital importing country, it has to align with the current worldwide tread of lowering taxes and providing fiscal incentives rather than discouraging new foreign investment through the imposition of high corporate income tax rates," he quoted the foreign chamber of commerce as saying.

Lapus said the foreign chambers of commerce back the 12 percent VAT being pushed by the House in the bicameral conference committee.

Based on statistics, the House’s VAT bill could generate as much as P91.516 billion, while that of the Senate could raise P65.249 billion, he added.

The passage of the VAT bill would convince credit rating agencies to upgrade the country’s rating in recognition of the government’s effort towards reform, Lapus said.

We Can Finish VAT This Week — Salceda

key member of the House panel in the bicameral conference committee on the controversial value added tax (VAT) reform bill said yesterday, conferees should be able to come up with the final version of the measure this week.

"We can finish it this coming week, way before the April timeline that President Arroyo wants. That is a reasonable expectation. My guess is that by Wednesday, a consensus should emerge on the final shape of the VAT bill," Albay Rep. Joey Salceda said yesterday.

"Wala naman kaming pag-aawayan (We don’t have anything to quarrel on)," he said.

Salceda, a hotshot stock market analyst before seeking public office, sits in a small and exclusive body called Economic Management Group that is advising Mrs. Arroyo on the economy. His comments smoothen what congressmen have earlier predicted would be a "bruising" conference on the VAT measure.

The two key points in that framework is that the final measure should raise P60 billion to P65 billion in additional revenues, and the contentious issues such as the House-proposed increase in the rate, from 10 percent to 12 percent, and the Senate suggestion to adjust the corporate income tax from 32 percent to 35 percent, he said.

He said the Department of Finance will present to the conference committee today simulations on which version or permutation would generate P60 billion to P65 billion.

The committee set those amounts are revenue targets since leaders of Congress had agreed with President Arroyo that they would pass tax measures that would raise a total of P80 billion, while the executive branch would generate P80 billion to P100 billion, including rate adjustments for debt-laden National Power Corp.

The revenue target of the legislature includes the P15 billion that is expected to be realized from higher excise taxes on cigarettes and liquor, which already took effect in January.

The House version of the VAT reform bill, anchored on increasing the rate to 12 percent, is projected to raise P91 billion, while the Senate version, which keeps the rate at 10 percent but removes almost all exemptions, would generate P65 billion.

Salceda said the conferees agreed in principle last Friday to adopt the no-pass through provision, which is present in both the Senate and House version, and the Senate recommendation to spread over five years the offsetting of the input VAT of businesses on their capital equipment.

The no-pass through provision would prohibit power generators and oil companies from passing the value-added tax on their products on to their customers.

While saying that the conference committee has agreed to adopt these proposals, Salceda nonetheless expressed his misgivings on these provisions.

"They are anti-business and are likely to depress corporate profitability and drag down the investment attractiveness of the country. Taken together, those three, including the proposed increased in corporate income tax, are a lethal mix," he said.

He said the no-pass through provision violates the principle of free markets, which holds that "all costs must be recovered, and tax is a cost of doing business."

He conceded that spreading the offsetting of the input VAT claims of business over five years would save the country P2 billion a year in interest payments.

But it is unfair for businesses since they have paid the input VAT and the government is postponing their offsetting, raising the cost of investing here, he stressed.

Salceda said he agrees with the opposition in making the rich pay more in taxes, but that lawmakers cannot afford to be reckless and capricious in doing that lest they drive away investors.

He also said the Senate panel is likely to insist on its proposal to increase the corporate income tax to 35 percent to spread the additional tax burden that would be imposed by the VAT reform bill.

‘"Ralph has read Supreme Court decisions upholding the prerogative of the Senate to overhaul any tax bill coming from the House," he said, referring to Sen. Ralph Recto, the lead Senate conferee.

Asked why Recto, if he indeed has read those decisions, did not include in the Senate version of the VAT bill his proposal reducing income taxes of salaried workers, Salceda said, "Ewan ko (I don’t know), but he could have justified it like the corporate income tax."

Recto and opposition Sen. Juan Ponce Enrile had originally proposed that individual income tax rates be cut by 20 percent to 50 percent.

While Salceda said the conference committee has agreed to put the increase in VAT at the bottom of its agenda, Tarlac Rep. Jesli Lapus, who heads the House panel in the committee, announced that foreign chambers were supporting the rate adjustment.

He said the foreign chambers are also against the Senate proposal to increase the corporate tax to 35 percent, claiming that the present rate of 32 percent is already the highest in the Association of Southeast Asian Nations region.

He expressed confidence that the eventual enactment of the VAT reform bill would prompt crediting rating agencies to upgrade their assessment of the country’s creditworthiness.

While they may be supporting the proposed VAT rate increase, the foreign chambers are opposed to the provisions of the Senate and House version lifting VAT exemption on electricity as this would result in the increase of the electric bills of households and commercial and industrial establishments.

It would make the cost of power in the country the second highest in Asia after Japan and would drive away investors, they said. — Jess Diaz