DOF mulls lowering VAT
MANILA – The government is looking at the possibility of lowering the 12- percent value- added tax ( VAT) rate on goods and services, the Department of Finance (DOF) said Sunday.
“Our proposal really is to clean up the VAT system,” Finance undersecretary Karl Kendrick Chua was quoted as saying i n an emailed statement.
According to Chua, the government could possibly l ower VAT rates once i t addresses the “multitude” of tax exemptions in the country.
“Over time, once we have addressed the exemptions, we may reduce the VAT rate. We will do it step by step,” he said.
The 12-percent VAT was implemented in 2006 under former President Gloria Macapagal-Arroyo.
“Our strong belief i s that the moment we have exemptions and a multitude of exemptions, it multiplies
the opportunity for discretion, and therefore corruption and tax evasion,” Chua said.
The Philippines currently has 59 lines of tax exemptions under the tax code. It also has at least 84 special laws with VAT exemptions.
The DOF has proposed to remove the VAT exemption on the business process outsourcing sector.
“We have a dual system, we have high tax rates for half of the population and half of the population pay very little[ because] of incentives, exemptions. So our tax system really is very inequitable in that sense. What we want to do as with the VAT is really to broaden the base so that it is fairer to everyone,” Chua said.
The first package of tax reforms under the Duterte administration – Tax Reform for Acceleration and Inclusion (TRAIN), or House Bill 5636 – was approved by the House of Representatives last month. Once the bill is enacted into law, VAT exemptions for the following sectors will be lifted – power transmission, lease of residential units, boy scouts and girl scouts, domestic shipping importation.
There is also a “conditional removal” of VAT exemption f or socialized housing, which will be based on the establishment of a housing voucher system.