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Lawyers may be exempted from VAT on Palace inaction |
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(29 January 2004, Thursday - The Manila Times)
By Arnold S. Tenorio, Senior Reporter LAWYERS are likely to remain exempt from paying the value added tax on income given Malacañang’s inaction on a Department of Finance request that President Arroyo veto a line in the bill removing the tax-exempt privilege of those engaged in the legal profession. |
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“Malacañang has until January 30 to act on the DOF’s request,” a government source said.
This gives the President only until tomorrow to undertake the line veto; otherwise the bill becomes law. The DOF has recommended the line veto, as international best practice dictates that lawyers should be subject to VAT. Before resigning in November, then finance chief Jose Isidro Camacho said there exists no justification for exempting lawyers from the tax. Apart from international best practice, the National Internal Revenue Code also provides for exemptions only for medical, dental and veterinary services, Camacho said. The bicameral conference committee last year approved the bill exempting professionals from the VAT and reverting to the gross receipt taxation of banks and financial institutions. The passage of the proposed measure would mean banks no longer have to pay VAT on their transactions. The final version of the bill however included the law profession among those sectors that would enjoy the VAT exemption. Finance officials have been pushing for the VAT on professionals, the non-collection of which is considered a major weakness in the country’s tax system. The government has been pushing for various legislative measures aimed at boosting its revenue collection effort. The Bureau of Internal Revenue also has implemented various administrative measures meant to plug loopholes in existing tax laws. A weak tax collection effort is believed responsible for the government’s budget deficit. The Arroyo administration is hard-pressed keeping the deficit below a P198-billion ceiling this year. A widening fiscal gap, which is characterized by declining revenues amid increased expenditures, is bad for the economy for two reasons. Apart from depriving government of resources to finance the delivery of social and other services, a deficit forces it to borrow money, which in turn requires setting aside money for servicing debt. Moody’s Investors Service on Tuesday reduced the credit rating of the government’s debt papers given concerns that intense politicking in the run up to the May presidential elections would erode public resolve to contain the deficit. A downgrade would make it more expensive for a country to borrow money abroad. Also a concern raised by the international credit rating firm is the possibility of a twin-deficit situation, wherein fiscal difficulties erode the country’s ability to pay its import bill and service its foreign debt. home | latest news |
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