The Bureau of Internal Revenue (BIR) announced on Wednesday it will collect the 12-percent VAT from motorists using tollway facilities like the North and South Expressways starting August 16.

In Memorandum Circular No. 63-2010 signed by BIR Commissioner Kim S. Jacinto-Henares, the tax will be collected from all types of vehicles using the highways.

“The VAT on toll has been there since 2005 when we amended the VAT law and it specifically states that the receipts of franchise holders should be subject to VAT or any services he provide. So in relation to that, I've already issued a revenue memorandum circular and this one I've discussed with the Toll Regulatory Board (TRB), Department of Transportation and Communications (DoTC), and there has been discussion also with toll companies. So it’s not something that will surprise anyone,” Henares said.

She said it is up for the TRB to factor in the 12-percent VAT determine on current toll rates.

“The TRB is meeting this week and so they should be able to resolve what will be the effective toll rate,” she said.

“We have to make people understand why we need to impose VAT, aside from it being required under the law, it is estimated that we would collect at least a P1 billion a month from the VAT on toll,” she explained.

The BIR chief said imposing VAT on toll is one way of collecting taxes from the transport sector which, based on BIR records, showed to be the sector that pays a low tax.

Revenue officials said the decision to finally impose the VAT will draw strong protest from various sectors as it will result in additional expenses for ordinary motorists.

Jeepney and bus fares will also go up as well as prices of foodstuffs and other basic commodities transported to Metro Manila and vice versa using the expressways.

Henares said the collection of the tax is prescribed under the Tax Code. She said it is not one of those items excluded from the payment of the VAT like schools and agricultural products.

She said the BIR will insist in the collection of the VAT unless Congress comes out with a law abolishing it, adding that the government needs more funds to finance President Aquino's pro-poor program.

Under the same directive, tollway operators were also instructed to settle their outstanding VAT liabilities on their earnings prior to August 16. Operators may apply abatement of the tax debts, surcharge and interest under revenue regulations No. 13-2001.

Expressway operators were earlier slapped with P3 billion VAT deficiency assessments for the years 2006 to 2009.

The previous BIR administration made the assessment after tollway operators expressed reluctance to impose the collection of the VAT from private motorists.

Meanwhile, the BIR chief cancelled on Wednesday all applications for leave of absence until the end of the year, “unless there is a valid reason for such an absence.”

Henares said the agency needs all available manpower in its all-out tax collection drive as a result of the last week's upward adjustments of its 2010 collection target from P830 billion to P860 billion.