Government to fight TRO on EVAT

President Arroyo vowed yesterday to fight tooth and nail to convince the Supreme Court to lift its temporary restraining order (TRO) indefinitely suspending implementation of the expanded value-added tax (EVAT) law.

Mrs. Arroyo said the executive branch, working through the Office of the Solicitor General, "will immediately seek a reconsideration of the decision to get our fiscal agenda back on track as soon as possible."

Finance Secretary Cesar Purisima said the Department of Finance (DOF) and the Bureau of Internal Revenue (BIR) will file a motion on Monday before the Supreme Court seeking the lifting of the TRO on the implementation of the EVAT law, also known as Republic Act 9337.

He warned that the government would lose P160 million for each day that the TRO remained in effect. The order suspended the implementation of the EVAT law just 18 hours after it went into effect last Friday.

"This is P5 billion in one month," Purisima said. "We were expecting the EVAT law to help reduce the budget deficit and generate funds for infrastructure and school buildings."

The President said the government would defend its case "with the same vigor" it showed in getting the controversial VAT bill passed by Congress last May despite strong opposition. She added that she went as far as "arm-twisting" congressmen to persuade them to pass the EVAT law.

"In the meantime, our revenue generation efforts shall be intensified on all fronts to offset the effects of the (restraining order) on our fiscal targets," she added without elaborating.

Mrs. Arroyo said the government "shall take all means to preserve the hard-earned confidence in our economy and continue to grow investments and jobs."

The EVAT law lifts VAT exemptions previously enjoyed by some industries, such as power, electricity, and air and sea transport. Those industries would now pay a 10-percent VAT to the government.

The law’s implementation resulted in immediate price increases on fuel, electricity, toll rates and airline travel.

The measure also increases the corporate income tax from 32 percent to 35 percent and gives Mrs. Arroyo the authority to increase the VAT rate by two percentage points to 12 percent next year under certain conditions.

This presidential authority was the basis for opposition legislators, along with certain transport sectors, to file a petition before the Supreme Court seeking suspension of the EVAT law, saying it was unconstitutional. The High Tribunal has summoned government lawyers to a hearing on July 26 to discuss the legislation.

Purisima said those who filed for the TRO only questioned certain provisions of the EVAT law, not the entire measure. He said they questioned a provision granting Mrs. Arroyo the authority to increase the EVAT rate to 12 percent by next year and another provision putting a 70-percent cap on VAT input.

He said they will ask the Supreme Court not to cover the entire tax measure with the TRO.

Purisima expressed concern over the TRO because the EVAT law could help generate funds to address the country’s huge budget deficit since 90 percent of the budget goes to debt servicing and the funds generated by the government cannot cover its expenses.

The EVAT law was the cornerstone of a series of reforms aimed at nursing the Philippines back to fiscal health and avoiding a looming budget crisis but some activists, businessmen, economists and opposition legislators opposed it.

Press Secretary Ignacio Bunye said the executive branch pushed for the passage of the EVAT law after careful consideration of its long-term positive effects on the economy.

Other government officials also said they were surprised and disappointed by the Supreme Court’s decision since the EVAT law was the factor that was to make or break the government’s fiscal reform program.

Budget Secretary Emilia Boncodin expressed hopes that the TRO would be lifted quickly, citing the EVAT’s importance to the economy.

Presidential consultant for investor relations Cora Guidote said the TRO would not affect government deficit targets but the move would send a bad signal to investors and delay social and infrastructure projects.

Price Rollback

In the wake of the order suspending the implementation of the EVAT law, the BIR has released a circular informing businesses that they should roll back prices on their products and services covered by the law to previous levels.

Energy Secretary Raphael Lotilla said gasoline stations should now roll back prices on their products while the TRO is in effect.

Those who paid higher fees while the EVAT law was briefly in effect, however, will not be refunded the difference.

"We cannot do anything for consumers who paid more because of the EVAT since the law was valid before the TRO was issued by the Supreme Court. We in the DOF and BIR immediately issued a memorandum agreement with establishments that collected EVAT to remit it to the BIR," Purisima said.

The Department of Trade and Industry said EVAT collected last Friday should be reflected in the receipts issued.

Noel Kintanar, president of the Philippine National Construction Corp. and Philippine Infrastructure Corp., said toll operators had problems reprogramming their computers to bring down toll rates to previous levels late Friday afternoon. He added that toll rate hikes in South Luzon Expressway and Skyway were deferred even before the EVAT was implemented early Friday.

Pro-administration lawmakers said in a joint statement that the move by opposition congressmen, led by House Minority Leader Francis Escudero, to seek the issuance of the TRO could be a deliberate attempt to frustrate government efforts to raise vital revenues.

Zamboanga del Sur Rep. Isidoro Real Jr. said the opposition knows "the government’s economic reforms are anchored on the EVAT implementation... They are mangling the President politically and now they want to attack her economically. But it is not her, but the country, which is bearing the brunt of their agenda against the President."

He said the public has always perceived the EVAT, along with other new tax measures, negatively because of the sacrifice it entails, and anti-Arroyo forces are using this negative reaction to court support for their political cause.

Bulacan Rep. Wilhelmino Sy-Alvarado said those who sought the issuance of the TRO cannot deny that their move was calculated to hamper the government’s efforts to address the country’s fiscal difficulties.

"It is too much of a coincidence. They filed the petition at the last hour so the government would have no chance to immediately counter their manifestation," he said.

Real and Sy-Alvarado expressed confidence that the TRO will be lifted once arguments supporting the EVAT law are presented before the High Tribunal on July 26.

‘Improve Tax Collection Instead’

For his part, Sen. Panfilo Lacson said the government could collect much-needed revenue by plugging all the loopholes in the tax laws and expanding the tax base.

Lacson, along with six other minority bloc senators, was one of the first to file a petition before the Supreme Court to stop the implementation of the EVAT law.

He also questioned the constitutionality of a provision granting Mrs. Arroyo the standby authority to raise the VAT rate by two percent in January 2006.

Lacson said that instead of raising the VAT rate, the government should just focus on collecting revenues from untapped sources "and not just raising or creating new tax laws. We have a large tax base that remains largely untapped."

He pointed out that while there are 2.8 million individual taxpayers, the number of potential taxpayers runs to about 14 million.

"If only tax collectors did not pocket what they should remit and remit what they pocket, we would be in a much better situation," Lacson said.

He suggested that local government units be provided with incentives to ensure that businesses issue the proper receipts.

Lacson also support the removal of all existing VAT exemptions and to improve the BIR’s tax collection efforts.

Citing data from the National Tax Research Center, he said that from 1998 to 2002, the government lost an average of P40 billion each year because it failed to collect about 30 percent of the VAT due for the year. — With Marvin Sy, AFP