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PIA Press Release
2005/01/24

Ilocos solon says agri and fishery products exempted from 2% VAT hike

by Freddie G. Lazaro

CANDON CITY (Jan 24) -- Representative Eric D. Singson of the Second District of Ilocos Sur had clarified that the proposal to increase of value added tax (VAT) rate from 10% to 12% has minimal impact on prices of agricultural products goods that the agricultural and marine products and hose monthly rentals not exceeding P8,000 were exempted from the said proposed bill.

Singson, one of the authors of House Bill 1468 calling for the increase in the current VAT rate from 10 percent to 12 percent, said however the rich Filipinos, who consume luxurious imported goods, will be the ones who will be paying more VAT since big companies and rich individuals who make importations of luxury goods will pay VAT to the Bureau of Customs.

"Contrary to common perception, the VAT rate increase will not result in drastic price increases. Simulations made by the National Economic Development Authority (NEDA) demonstrate that the inflationary impact of the VAT, particularly on goods generally consumed by the poor will only be minimal," he said.

"For processed milk, canned meat and fish, the inflation would only be .02% and even lower for the manufacturers of coconut and vegetable oil at only .01%," he added.

To ensure that the VAT system will not cause undue hardship to our marginalized and poor sectors of the society, Singson said that this bill has pro-poor provisions like exemption on sales of agricultural and marine food products being consumed by poor sectors like rice, raw sugar, salt, fresh meat, chicken, livestock, and poultry.

"The lease of residential units with a monthly rental of not exceeding P8,000.00 (Eight Thousand Pesos) is also exempted," he said.

Based on the consumer price index, the total inflation rate is only 1.92%. For a pack of noodles with a price of P10.00, the increase of price after the 2% VAT increase is only 20 centavos or with a total price of P10.20.

For processed meat,canned fish or beef with a price of P100.00, the price would only increase by P2.00, with the 2% VAT increase, the total price would be P102.00.

Singson, who was the Vice-Chairman on House Committee on Ways and Means, disclosed that VAT was introduced in 1988 and it was designed to impose taxes on goods and services.

"VAT has become the second biggest revenue earner of our government, but as in other countries it should be adjusted because in the latest record on VAT taxation system, out of 121 countries that adopted the VAT system of taxation, 97 nations have a VAT rate of more than 10% with an average of 15%, while only seven adopted the rate below 10% and 17 nations adopted a 10% VAT taxation rate," he told.

"China has a VAT rate of 17%," he added.

According to Singson, the upward adjustment in the VAT rate will bring in estimated incremental revenue of P35 Billion, which will tremendously help finance government operation.

"The amount is rather big, as this is a consumption tax whose coverage is wide-raning."

At present, the BIR collects P80 Billion from VAT annually and the Bureau of Customs collected around P50 Billion a year. With the introduction of measures to plug the loopholes of the VAT system of taxation that are incorporated in the proposed law, the 2% increase will be significant, indeed.

"It is worth noting that only 3 Million Filipinos out of the 85 Million pay their income tax. With this number how can the government ever sustain development without resorting to indirect taxation like VAT?" the Ilocos Sur solon asked. (PIA-Vigan) [top]

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