Dominguez rejects VAT hike

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Department of Finance (DOF) has rejected anew the proposal to increase value-added tax (VAT) from 12 percent to 14 percent to offset losses from the government’s proposed cut in income and corporate taxes.

“There has been a proposal to increase the VAT rate to 14 percent to offset the income and corporate rate cut. I am inclined against that proposal,” Finance Secretary Carlos
Dominguez 3rd said in a speech during the 112th anniversary of the Bureau of Internal Revenue (BIR).

The VAT hike was one of the proposals under the Comprehensive Tax Reform Program (CTRP) of the previous Aquino administration. The CTRP calls for lower income tax rates but offsets the reduction by increasing the VAT rate to 14 percent.

“We could double VAT collections simply by being more efficient in collecting it,” Dominguez said.


He added that the Durerte government’s decision to cut to propose legislation cutting tax rates for individual and corporate taxpayers should serve as a challenge to revenue collecting agencies.

“We should be able to compensate for this rate reductions by rapidly broadening the tax base and improving VAT collection efficiency,” the DOF chief said. “There are some things we could do short of raising new taxes,” he added.

For instance, he said the BIR can reorganize the Large Taxpayers Unit responsible for the bulk of collections.

“I cannot imagine that we only have 2,800 so-called ‘large taxpayers.’ The numbers should at least be double that,” Dominguez said.

“We have to grow our revenues faster. The current tax efforts among our neighbors run as high as 17 percent,” he added, referring to the tax collection as a percentage of gross domestic product, which as of the first quarter of 2016 stood at 13 percent.

Dominguez also called on the BIR to simplify forms and the process of tax payment so that queues will be avoided.

“There must be a way to eliminate long lines at the BIR offices. Why punish them when they have come to pay?” he said.

“[I] hope that simplified forms for smaller companies or individuals can be made. There is really no need to make our clients feel exasperated trying to fill up the forms,” Dominguez added.

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1 Comment

  1. vat should be on selection of products alone… for example do not add vat on sugar, rice, noodles sardines cooking oil… you can impose vats on luxuries,