10 October 2010

Opinion on PNoy's report

"…bawat linggo po ay may bago tayong kasong isinasampa kontra sa mga smuggler at sa mga hindi nagbabayad ng tamang buwis."

As that statement remains to be foreseen, Pilipina Ako would just talk about the agency that would help PNoy remain true to his word.

Commissioner Angelito Alvarez of the Bureau of Customs (BOC) disregarded last July the contribution of the Tax Expenditure Fund (TEF), which accounts to about 10 % of the total tax collection. Though only ‘revenues on paper,’ the TEF had been the reason why the BOC failed to meet its collection goal.

The government raised the agency’s goal to P280 billion this year, P5 billion of which will be in the form of cash collection. Hopefully, this would eventually decrease the country’s fiscal deficit to 2% from this year’s 3.95%.

But sovereign analyst Benard Agost from STANDARD & Poor’s (S&P) thinks our government cannot rely on improving tax efficiency alone. Too late! Finance Secretary Cesar Purisima has already ditched the recommendation of the previous economic team.

In the five revenue-enhancing measures crafted by the previous Philippine economic managers, the government would have to (1) raise the value-added tax to 15% and lower income tax rate, (2) streamline fiscal incentives, (3) implement a simplified net income taxation scheme, (4) restructure excise taxes on alcohol and tobacco products, and (5) harmonize petroleum products. This would have brought P94 billion and reduce the structural revenue weakness of the country.

Hermilando Mandanas, Chairman of the Ways and Means Committee in the House of Representatives, though has another proposal: include major firms in the equation.

Some corporations whose profits are in the billions pay nothing because of the tax provisions in the present law. It also only depends on the collectors and examiners how much a person or a company had to pay.

In House Bill 1970, 6% would be deducted from the current tax, retired servicemen and policemen would be exempted, and sales of small and medium entrepreneurs (SMEs) would be increased. It could even obviate the need to levy VAT on toll fees!

All the government has to do is simplify tax provisions. And who knows, every Filipino would develop a friendlier perception to government tax impositions, and foreign investors would see our country more favorably! Singapore has low VAT rates for its people yet its economy remains successful.

But that simple “sales tax” system wouldn’t work in us, Undersecretary Gil Beltran of the Department of Finance, argued. It is good only for single-crop economies that do not produce value-added products and just import their needs, he added. Never mind that that taxation system would abolish the other tax stratagems. It would eventually regress as consumption falls in income percentages.

Currently, government tax revenues derive from corporate and personal income taxes, VAT payments, excise taxes and percentage taxes. The EVAT obliges small sari-sari stores or restaurants that earn more than P1.5 million annually to pay 12% tax.

Although VAST could further reduce tax rates, Pilipina Ako understands Finance Undersecretary Beltran’s worry. He knows better about numbers.

What Pilipina Аko couldn’t understand is Finance Secretary Purisima’s immediate disapproval. Mandanas’ bill seems to be just like the ‘simplified net income taxation scheme’ the former economic managers formulated.


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