MAP calls for lesser VAT exemptions in tax measure

The Management Association of the Philippines (MAP) has urged to reduce the number of VAT exemptions in the proposed tax reform bill if it really means to achieve a net positive outcome for the economy as a whole, not just for a small select group.

“The too numerous exemptions from VAT need to be rectified and reduced based on whether they are truly necessary,” MAP said adding, “The loss in revenue from the excessive exemptions in the Senate version compared to the DOF’s is estimated at R67 billion. Such a large loss would greatly harm the government's program.”

In addition, MAP has called on the tax on sugar-sweetened beverages to be based on sugar content, not on the liquid volume.

It supports the exemption of milk products, which are mostly for children, and even the coffee mix drink given its importance in the daily lives of Filipinos (an estimated 90% of adult Filipinos consume a daily cup of coffee mix drink).

Overall, MAP has been supportive of the Duterte administration’s effort to overhaul the country’s tax system, stressing this has been long overdue.

“Philippine business and the Filipino workers have long been overburdened with an outdated tax system that has made the country uncompetitive vis-avis its dynamic neighbors,” MAP said in a statement.

MAP cited its support particularly on the recommendation to reduce personal income taxes, particularly for those earning less.

“We are especially supportive of the plan to exempt from income taxation those earning less than R250,000 per annum, which we believe is the minimum needed for workers to lead a reasonable life for themselves and their family. We also believe it is important to factor in an inflation-based adjustment. Otherwise the law, in time, will also become less effective,” MAP said.

It also cited the government’s effort to spend for infrastructure, which has led to an intolerable traffic situation today and a lack of support for agriculture and the rural sector, among others. The additional revenues from the tax reform will partly fund the government’s R8.4billion infrastructure program.

The need for the Department of Finance-proposed level of additional taxes has become even more critical with the recent passage of RA 10931 providing free tertiary education to all those in state universities and colleges. With this being added on to the introduction of free irrigation, and the Congressapproved increase in SSS pensions, it is clear that greater revenues must be raised, beyond what the Senate version would currently allow.

“So we appeal to Congress to structure the bill toward allowing measures for the government to generate higher levels of resources,” MAP said.

The DOF estimates a need for an additional R156 billion if the Administration’s BUILD, BUILD, BUILD program is to be attained without going beyond a 3 percent of GDP debt ceiling.

In this regard, MAP also strongly backed the R6/liter tax on fuel noting that Filipinos used to pay more than that when oil was over $100 a barrel.

A gradual 3-2-1 peso annual increases over three years could be an acceptable compromise given the timeframe for building infrastructure, it said.