Lacson believes VAT exemption privileges reduction key to solving TRAIN law problems

Published May 27, 2018, 5:48 PM

by Francine Ciasico

By Hannah Torregoza

Senator Panfilo “Ping” Lacson today expressed belief that reduction of the Value Added Tax (VAT) exemption privileges and not the suspension of excise tax on fuel is the key to solving the problems hounding the government’s Tax Reform for Inclusion and Acceleration (TRAIN) law.

Senator Panfilo Lacson during the hearing of the Blue Ribbon committee on the nabbed P6.4 billion worth of shabu shipment from China, at the Senate of the Philippines in Pasay on Monday. (JAY GANZON / MAN ILA BULLETIN)
Senator Panfilo Lacson (JAY GANZON / MAN ILA BULLETIN)

Lacson, in an interview over Radio DZBB, said suspending the excise tax on fuel would eventually erode the government of revenues needed to pump up the country’s economy.

“The problem to that proposal (to suspend excise tax) is revenue erosion. Where will you get the revenues? What will compensate?” Lacson pointed out.

“It has to be studied by Congress and I believe it should be (done via) holistic (approach). It is easy to call for the suspension of excise tax on fuel—it’s popular: not only easy, but also popular—but where will you get the lost revenues?” he pointed out.

Lacson said this was something he pointed out to the Department of Finance (DOF) and other state economic managers of the Duterte administration when they were lobbying for the government’s tax reform program to members of Congress last year.

Compared to other neighboring Asian countries, Lacson said the Philippines has at least 143 lines of VAT exemption. Some companies are benefiting from the opportunity since 1990 or 2000.

“If our nominal GDP (Gross Domestic Product in 2015) is at P15 trillion, of course, with inflation still not factored in, the government stands to earn P1.5 trillion with a VAT pegged at 10 percent, assuming there are no VAT exemptions,” Lacson pointed out.

“That would have been the ideal situation. But of course, it’s impossible to lift all the exemptions,” he said.

“We learned then that Malaysia imposes a six percent VAT, but the VAT exemptions are only given to 14 entities; Thailand, at seven percent VAT, gave exemptions to 25 firms; here in the Philippines, we have around 143 lines of VAT exemption,” he said.

“Almost all—power, cooperatives, eco-zones, industries—that when we reviewed (their reports) were enjoying VAT exemptions since 1990, others since 2000. That was meant to help them for their startup business, but I think they have already recovered and are now earning much more. So, maybe it’s time they let go of these exemptions,” he stressed.

For him, Lacson said the best way to counter the high cost of fuel and other petroleum products would be to limit the number of VAT exemptions being granted by the government.

“Because these are all happening right now, I would discuss this with my colleagues and I can file the bill lowering the number of VAT exemptions,” Lacson said.

Lacson said he will ask a member in the House of Representatives to file a counterpart bill so both houses can tackle the bill.