House panel okays proposal to replace VAT with VAST

December 9, 2010 4:12 am 

By Lilybeth G. Ison

MANILA, Dec. 8 — The committee on ways and means of the House of Representatives approved on Wednesday a proposed measure seeking to impose a value simplified tax (VAST) in place of the value added tax (VAT).

House committee chair and Batangas Rep. Hermilando Mandanas, author of House Bill No. 1970, said the approval of the measure will accelerate the legislative process on the bill.

"We are now ready for a full debate on the measure as we will hear the views of our other colleagues in the plenary," he said.

Mandanas said his authorship of the bill had been motivated by the need to increase tax collections, improve the people's perception regarding tax impositions by the government, provide a system that eliminates the scheme predisposed to leakages and loopholes, avoid occasion of corruption, and put in place a more efficient means to maximize the revenue take of the government.

"I've expected differences of opinion on the bill. But let me stress the bill is a response to our promise of change to the people. We've also promised to reduce corruption," he said.

"This bill will also reduce our budget deficit. The VAT is a good law itself, but the problems lies on its actual implementation. Even in the development of our country, it doesn't work," he added.

Mandanas said HB 1970 seeks to amend the National Internal Revenue Code (NIRC) of 1997, to institute the VAST that will effectively replace the highly unpopular VAT.

"Without Congress being perceived to be attempting to hike taxes imposed on the consumers or ultimate users of goods and services, HB 1970 aims to increase the collection of taxes under the NIRC of 1997, as amended by simplifying the taxation system, and reducing the discretion or interpretations of tax applicability that increase temptation for corruption and reduce the tax collection efficiency of the government," he said.

HB 1970 provides for a reduction of the tax rate by 50 percent, or from the current 12 percent to six percent. It shall also allow all the exemptions under the VAT system to continue under the VAST.

Section 1 of the bill which seeks the amendment of Section 105 of the NIRC, defines VAST as an indirect tax and the amount of which may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services.

This rule shall also apply to existing contracts of sale or lease of goods, properties or services at the time of the effectivity of Republic Act No. 7716, or the restructured VAT law.

The bill also provides for a repeal of the input tax and claims of presumptive VAT provisions which were found to be occasions of corruption and causes of material reduction in the expected tax collections of the government.

It also provides for establishment of a framework to facilitate further reduction in the VAST rate through simplifications of the system and reduction of complicated and discretionary tax provisions.

The proposed law would also increase further the exemptions under the VAST system by including all the Armed Forces of the Philippines (AFP), Philippine National Police (PNP), Coast Guards and Customs Police, and also retired public school teachers who served over a period of not less than 30 years, or even earlier, if retirement is due to injuries or sickness suffered while in the line of duty.

The threshold of the exempted maximum sale subject to VAST shall also be increased for small vendors and sales/lease of real estates. The provisions applying for three percent tax on sales amounting to P2.5 million and below shall also continue based on the bill.

Cavite Rep. Crispin Remulla, who moved for the approval of HB 1970, expressed hope for cooperation from the Department of Finance (DOF), Bureau of Internal Revenue (BIR) and National Tax Research Center (NTRC) in supporting the proposal.

"We need to shape up the system. Hence, we are calling for the cooperation of Department of Finance, Bureau of Internal Revenue and National Tax Research Center in this endeavor," said Remulla.

In 2008, the government raised P121.14 billion from the RVAT or P32.21 billion higher than the 2007 collection of P88.93 billion.

With VAST, it is expected to generate an additional yearly revenue of P50 billion for the government. (PNA)

scs/LGI

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