Lawyer Frederick Capitan, former revenue district officer (RDO) and a top official of the defunct Tax Fraud Division (now the National Investigation Division), said that RA 9337 laid a cap on the claim on the input VAT "to the extent of only 70 percent of the output VAT per quarter."

Under this provision, spelled out in Section 110 (b), Capitan said, the law means that "if your output VAT is R100,000, you can only claim an input VAT of R70,000 even if you have more than R70,000 in input VAT. So, you will be forced to pay the 30 percent (R30,000) output VAT even if you have more input VAT."

The law, Capitan stressed, also allowed the businessman or corporation to pass on 100 percent of the 10 percent output VAT based on sales.

"These provisions are mandatory, very clear and without any exceptions and/or conditions," he added.

Shockingly, Capitan revealed, the Department of Finance (DoF) "had been issuing policy statements and fliers entitled ‘Salient features of RA 9337’ and announcing as a policy that the cap on input VAT crediting to not more than 70 percent of the output VAT is applicable only if the input taxes in a quarter exceed the output taxes and, if the input taxes do not exceed the output taxes, full crediting of the input tax is allowed."

The former BIR official says these conditions make it possible for businessmen to claim 100 percent of input instead of only 70 percent.

Capitan explained that this policy statement "is in direct confrontation with the mandatory provisions of the EVAT Law. The DoF is now legislating and amending clear provisions of the law through a policy statement, in the process usurping a legislative prerogative."

At the same time, the lawyer said the DoF might not have realized that the "policy statement can be a fertile ground for graft.

"In the investigation of tax cases, the prober will only concentrate on the purchases with input taxes. Once the input tax is one centavo more than the output VAT, then he can now demand the payment of the 30 percent output VAT from the taxpayer," he said.

Capitan stressed that the DoF statement ran afoul of the intent of the framers of the law, who wanted to broaden the base for the collection of expanded VAT rather than constrict the taxpayer base.

Moreover, he noted that there are other shortcomings committed by the DoF, including the reclassification of certain commodities earlier categorized by Congress to be falling within the coverage of EVAT.

By reclassifying such commodities, Capitan said the DoF has overstepped its authority and transgressed what is clearly the power of Congress to legislate and specify the articles, goods, commodities and services that are covered by RA 9337.