The 12 percent Expanded Value-Added Tax, which takes effect today, is projected to yield P75 billion in the next eleven months and in four years about P120.44 billion additional revenues for the government, enough to wipe out the chronic budget deficit.
Finance Secretary Margarito B. Teves again emphasized yesterday that the expanded VAT is crucial since it would allow the government to reduce the fiscal shortfalls and ensure economic growth.
"The government will use the new revenues to reduced the budget deficit and place public finances on a sustainable footing. (This will) help lower interest rates for businesses looking to borrow money to grow their business and improve investor confidence in the Philippines," Teves told a press briefing in Makati. With him are other economic managers Trade and Industry Secretary Peter Favila, Energy Secretary Raphael Lotilla and Budget Undersecretary Laura Pascua.
For her part, Pascua ensured that the additional revenue from the expanded VAT would be used to invest in infrastructure and basic services.
Based on Department of Finance document, the utilization of the expanded VAT revenues will be broken down as: 30 percent for capital outlay and 70 percent for debt and deficit reduction. This ratio will be adjusted in favor of capital outlays over a four-year period.
Pascua said that of the P75 billion from expanded VAT, P23 billion would be spent for capital outlays and P54 billion for deficit reduction. "The P23 billion will be invested in basic services and capital expenditures." In the meantime the 70 percent allotted for debt and deficit reduction will be reduced to just 50 percent by 2010. (LCC)
Of the P23 billion, the DBM official said they are proposing to spend P20.2 billion or 90 percent for economic services such as roads, airports and seaports, irrigation, among other social services projects.
About P2.3 billion of the program will be spent for health care and education.
The DoF has been pushing for the earliest possible implementation of the new VAT law as this would serve as buffer for the economy against graver impacts of rising global oil prices, interest rates and foreign exchange volatility.
The new tax has several provisions to cushion the impact of rising global oil prices on domestic consumer prices. These include zero-rating on power from renewable energy sources, which account for 57 percent of the country’s total energy supply. The new law also reduces excise tax on kerosene, diesel and bunker fuel.
In the meantime basic commodities such as vegetables, meat, fish, eggs as well as low cost housing and education expenses remain VAT-exempt.
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