Vice President Jejomar Binay on Thursday said he disagrees with the government’s proposal to raise the current value-added tax (VAT) from 12 percent to 14 percent to compensate the loss to be incurred from lower tax rates if the tax reform bill is passed into law.
“The Philippines already has the highest VAT rate in the region. Increasing VAT should only be a last resort,” Binay said in a statement.
“Raising VAT would cancel the effects of the tax reform act and defeat the goal of allowing our countrymen to enjoy more of their hard-earned money,” he said.
Binay added that lowering tax rates will allow consumers to spend more and that the government will recover some of the short-term revenue loss through increased consumption taxes, without necessarily raising VAT.
“Instead of being fixated with VAT, we should look at a menu of options, including improved tax collection efficiency and more aggressive campaign to catch tax evaders; sliding scale excise tax on gas, diesel and other oil products; sale of government assets and privatization of select government-owned and -controlled corporations; approval of revenue-generating measures; and a stronger crackdown on smugglers,” he said.
Binay described the country’s tax system as burdensome and exasperating.
A recent study that the Philippines has the most tedious tax payment system, he said, underscores the urgency of tax reform in the country.
The study by international audit firm PricewaterhouseCoopers puts the Philippines in 127th place among 189 economies in the ease of paying taxes.
It revealed that businessmen take 193 hours to pay 36 different kinds of fees and taxes per year in the country.
“How can we encourage foreign investors to put money here if we are going to make it difficult for them to do business in our country? They certainly would say it’s not fun in the Philippines,” Binay said.
He noted that it is “easier” to pay taxes in Ethiopia (112th in rank) where reportedly there is widespread hunger, in Syria (117th in rank) where people are fleeing because of political violence and in Kosovo (63rd in rank), which had just emerged from war and is now one of the newer independent countries.
The Vice President said while Malacañang has promised to simplify the process of paying taxes, it has not offered any concrete steps so far.
“It is easier to give promises and make plans but what we need is tested and competent executive ability,” he added.
Binay said that similar to what he did as local executive of the nation’s financial capital, Makati City in Metro Manila, should he be elected President, he shall put a sense of urgency in all government processes.
“From the normal 16 steps, we will reduce the requirements in the business registration system to six steps to further improve our competitiveness. Once the basic requirements have been met, provisional permits shall then be issued,” he added.
If there is no decision from a certain department or agency within a certain number of days, Binay said, an application should be as good as approved so as not to stall the process.