More taxes - the real game

DIE HARD III
Herman Tiu Laurel
7/25/2011



While the country gets increasingly distracted by the “Hello Garci” and Lintang Bedol dramas, the many Gloria Arroyo plunder cases that seem to have a number of legal loopholes, as well as today’s worn-out “anti-corruption” State of the Nation Address (Sona), the real game in the system — the financial mafia’s blood-sucking of the people — continues to intensify.

The Supreme Court (SC)’s approval over the weekend of the 12-percent Value Added Tax (VAT) on toll fees by the Bureau of Internal Revenue (BIR), affecting among others, the North and South expressways, is just the latest in a string of backbreaking tax burdens and price hikes. What this SC decision also makes clear is that nothing can stop the toll operators from passing it on to commuters.

Perhaps to soften the impact of its decision, the SC ponente resorted to some semantic play. It claimed that while “the seller (of the toll service) remains directly and legally liable for payment of the VAT... the buyer bears the burden since the amount of VAT paid by the former is added to the selling price,” arguing that “Once shifted, the VAT ceases to be a tax and simply becomes part of the cost that the buyer must pay in order to purchase the good, property, or service,” thereby declaring that the “VAT on tollway operations cannot be a tax on tax even if toll is deemed as a ‘user’s tax’… since VAT is assessed against the tollway operator’s gross receipts and not necessarily on the toll fees.”

But is there really a difference if VAT were to be based on the operator’s receipts since all of it will be taken from commuters’ pockets anyway?

The problem with this new, additional expanded VAT (eVAT) in the life of Filipinos is the eVAT law itself — a law that has opened the floodgates to endless regressive taxes. A little history of the tax system in RP would thus be helpful.

Before Edsa I, the country had progressive taxation based on income tax where those who can afford paid more while those who earned less paid less. The VAT law that came with the Cory Aquino regime changed all that. It introduced the VAT system, which is based on taxing consumption, with the end-users shouldering much of the burden. It is regressive since it taxes the poor more than the rich.

A tax on toll fees, for example, would be the same for a brand new Mercedes Benz and a 20-year-old dilapidated Toyota Corolla whenever such vehicles pass through the toll booth.

Early on, when the VAT was made part of the Comprehensive Tax Reform Program (CTRP), it was touted as the last time any new tax would have to be raised. But, as we all know, the VAT was immediately expanded under Fidel Ramos. Of course, it was the IMF-WB that lobbied for all of it; but since it was our Congress that capitulated (as usual), it only exemplified the idiocy of our politicians for crafting such a law.

One such fellow, Nueva Ecija Rep. Renato V. Diaz, is now ironically one of two petitioners at the SC, challenging the Department of Finance (DoF) and the BIR’s imposition of the toll eVAT (the other being former Trade Assistant Secretary Aurora Timbol).

Since the high court in its decision was able to state, “The VAT on franchise grantees has been in the statute books since 1994 when Republic Act 7716 or the Expanded Value Added Tax law was passed. It is only now, however, that the executive has earnestly pursued the VAT imposition against toll way operators,” clearly, Diaz has been ignorant of the full meaning and impact of the law he co-authored all along.

That said, the imposition of the tax is still a political as well as an ideological issue. Even as Gloria Arroyo’s supporters say that she stalled on the VAT on toll ways throughout her nine years in office (as opposed to Aquino III, who only put the brakes because it was challenged before the SC), the truth is, she only withheld its implementation because of political expedience, whereas Aquino III, without a similar sense of the limits of his “political capital,” merely allowed his BIR appointee and Finance Secretary, both IMF assets, to get the better of him.

The case brought before the SC actually saved Aquino III for a while. Now that he has to face the music and decide on whether to impose or not, his campaign promise of “no new taxes” will surely be tested. Still, given his administration’s financial and economic thrust, there isn’t any hope for an ideological shift to progressive taxation, which is our only liberation from the continued tax exploitation and extraction.

But as bad as this recent development already is, the pressure to raise the eVAT from 12 to 15 percent is still on, as reflected in the official pronouncements of the DoF, Neda (National Economic Development Authority), BSP (Bangko Sentral ng Pilipinas), and the BIR.

Consumers and commuters desiring to stop the VAT’s march to more perilous heights, though, do not have the law on their side. As in the VAT on toll ways, they are only limited to making appeals for the Chief Executive’s better sense (if that’s even possible at all).

However, since Malacañang is still in the mode of fending off pressure to hike the eVAT to 15 percent, it is more than likely to give in to the temptation of the green-lighted VAT on toll ways.

As such, Filipino consumers and commuters will never have a permanent respite from increasing regressive taxes unless the country returns to progressive taxation — which will only happen after a genuine popular revolution.

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