Instead of hoping for the approval of the value-added tax (VAT) bill
before Senate takes its recess, government can work on other pro-people
revenue measures like improving tax collection and going after tax
evaders.
Research group IBON Foundation advises the Arroyo administration not
to be too fixated on the VAT bill approval because there are other
ways for government to raise revenues. One is to plug leakages in
tax collection, as government data reveals that the average VAT leakage
for the period of 1998 to 2002 was P41.6 billion. This is 30% of the
country’s potential tax due.
Government data also shows that there is a high level of tax evasion
among corporate taxpayers, which amounted to an annual average of
P54 billion, or a tax evasion rate of 38% of potential tax due. Going
after tax evaders, and thus improving direct taxation is a more reasonable
measure than pushing for indirect taxation schemes like VAT.
VAT itself is inherently inequitable due to its indirect nature. It
imposes a uniform tax rate on all taxpayers regardless of their incomes
or ability to pay. This goes against the basic principle of taxation
that it must be equitable. Worse, the income from these taxes does
not go back to taxpayers in the form of social services, but to debt
payment.
The Arroyo administration has vowed to match the public’s sacrifice
of paying higher taxes with a commitment to cut government excess
spending, fight graft and corruption and prosecute tax cheats. But
these are policies that government should be pursuing rather than
implementing new tax measures. It is unjust for government to offer
its commitment to these policies in exchange for the public’s
support for a VAT increase.
Given the increasing difficulty of making ends meet as prices continue
to rise and wages remain stagnant, any additional tax burden would
only serve to drive the majority of the people further into poverty
and debt. Thus aside from improving tax collection and going after
tax evaders, government should explore other pro-people measures like
reforming its debt management, addressing graft and corruption and
reimposing tariffs to specially-sensitive products.
-IBON Foundation, Inc.
Rosario Bella Guzman (Executive Director)
Antonio Tujan (Research Director)
