DOF reiterates opposition vs ‘value-simplified tax’

The Department of Finance on Friday reiterated its opposition to the measure slashing the value-added tax (VAT) to 6 percent from the present 12 percent. House Bill 1970, which the Lower House approved last week, proposes to replace the 12-percent VAT with the 6-percent “value-simplified tax" or VAST. The proposed law would also abolish the any tax credit mechanism or scheme. “Without this mechanism, VAST is equivalent to a turnover type of sales tax," Finance Undersecretary Gil Beltran said in a statement. “It would cause prices of goods and services to increase." Beltran pointed out, “consumers will definitely be put at a disadvantage." Prices of a certain good will go up because a 6-percent tax is slapped on every stage that the good has to pass through before reaching the hands of the consumer, he explained. Under the VAT system, the final consumer pays a tax equivalent to 12 percent of the price of goods or services. “This is made possible through the input VAT credit mechanism which takes away the tax paid at prior stages," Beltran said. In the short-term, Beltran said the more immediate impact of the House-approved measure is the immediate reduction in the revenues that are collected at the ports. “Currently, the Bureau of Customs collects a 12-percent VAT on imports. This, however, will drastically be reduced to only 6 percent under the VAST system. This will create extreme pressure on the government’s finances and will make fiscal consolidation in the short-term even far more challenging," Beltran said. — JE/OMG, GMANews.TV