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DoF sees P105 B from VAT in 2006 |
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By LEE C. CHIPONGIAN
The Manila Bulletin 05/11/2005 Finance Secretary Cesar V. Purisima said yesterday that removal of the value added tax exemptions will raise VAT collections by P31 billion this year and P105 billion in 2006. Purisima who wants his VAT raised by two percentage points to totally wiped put budget deficit within months, said that he is still "pleased" with the approval by the bicameral committee of the VAT bill yesterday. "I am hopeful that this will be ratified by both chambers this week and signed into law immediately after that," he said. Purisima again reiterated that VAT is the key to fiscal consolidation. "We expect to raise an additional P28 billion to P31 billion this year from this bill and P97 billion to P105 billion next year." He said the Department of Finance would be applying all the proceeds of VAT this year to deficit reduction. By 2006 he said the deficit would be reduced by 70 percent. In the meantime part of new revenues will also be used for budgetary support such as social services and infrastructure. "On the part of the DoF we need to reward our legislators with better efficiency in collection and I have instructed the BIR (Bureau of Internal Revenue) and the BoC (Bureau of Customs) to intensify their efforts to improve their collection efficiencies." The bicameral conference opted for a compromise ten-percent VAT while giving President Arroyo authority to raise the rate to 12 percent next year. Purisima insisted earlier that in the fiscal position side, it is really the VAT hike that will reduce the deficit further. The DoF official stance is the 12 percent VAT since an increase will be the easiest to implement. Lifting the exemptions will help but it will take a longer time, Purisima said. The DoF chief said his priority is to cut public deficit to P203 billion or lower this year from P233 billion in 2004. Budget deficit, in the meantime, is targeted at P180 billion but once the VAT increase is passed, the deficit projection will be reduced to as low as P160 billion. The Senate voted to keep the VAT at ten percent and to remove exemptions, such as those given to power generating firms and professionals such as lawyers and doctors. The DoF was pushing for the VAT increase bill, from ten percent to 12 percent, to raise an additional P35-40 billion. This is the House version, which congressmen approved earlier. These tax measures would make or break the deficit goal. The DoF said without the VAT, government has no other recourse but to revive previous proposals to collect new taxes, such as the franchise tax on telecommunications, soft drink taxes and especially taxes on texting. Earlier the International Monetary Fund, who has been pushing the Philippines to implement strong up-front fiscal adjustments, insisted that the government should target a deficit equivalent to 2.5 percent of GDP for 2005, rather than the 3.5 percent to GDP ratio set by the DBCC. The IMF said instead of targeting a budget shortfall of P180 billion or 3.5 percent to GDP the government should aim lower or about P128 billion, or 2.5 percent of GDP as recommended by the multilateral funding agency. |
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