By LEE C. CHIPONGIAN
The Department of Finance wants to make sure that the VAT (value- added tax) increase from 10 to 12 percent on February 1, 2006 is "legally solid" and "based on accurate information."
Finance Secretary Margarito Teves said this is crucial because the new VAT law is "open to legal risks." Congress passed the expanded VAT bill in June but legal challenges delayed its implementation.
"There are varying proposals to amend the VAT. We can’t deny that it is open to legal risks because of the interpretations of the law." He said this is their look out, to ascertain that Republic Act 9337, which contains the expanded VAT law is legally defendable. Last October the Supreme Court, after freezing the new VAT for three months, finally ruled that RA 9337 is legal and constitutional.
In the meantime, the VAT rate increase will be delayed by a month because full-year economic indicators such as the budget deficit and growth in gross domestic product will only come out around this time.
The DoF, after discussions with various government agencies to determine how soon their official figures on VAT collection, GDP and National Government deficit will be available, has determined that February 1 will be a good day to impose the tax increase.
"We want to use official figures to ensure that our recommendation to increase is based on accurate information and is legally solid," Teves added.
RA 9337 or the expanded VAT law states that the president, upon the recommendation of the finance chief, will increase the VAT rate to 12 percent on January 1 if conditions are met, such as if the budget deficit ratio to GDP goes beyond 1.2 percent.
These numbers or indicators such as the GDP and the fiscal position are usually announced middle of the first quarter. At
P180-billion budget shortfall target this year, which is 3.4 percent of GDP, it is clear that the VAT rate will be adjusted higher next year.
In the meantime, Teves said his office would continue to work with other government agencies and "to find ways outside of the expanded VAT law to lighten the load and maximize the VAT reform law’s revenue-generating capabilities."
