Palace warms up to measure exempting utilities from VAT

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MALACAÑANG is inclined to endorse a measure filed by the Makabayan bloc in the House of Representatives that seeks to exempt utilities, including oil, from value-added tax (VAT) coverage provided it would be beneficial for all stakeholders.

Presidential Communications Secretary Herminio Coloma Jr. said the Cabinet’s economic cluster will discuss the implications of the bill.

“We will await study and recommendations from Cabinet’s economic cluster,” Coloma said in a text message to The Manila Times on Wednesday.

The Palace official said that while the proposal sounded favorable to consumers, it has “far-reaching complications” that may eventually affect the government’s budget and subsequently, the delivery of services.


“This involves amendments of existing laws and require a comprehensive study of far reaching implications on revenue collections and budget deficit,” Coloma said.

The Makabayan bloc is an alliance of party-list groups Bayan Muna, Anakpawis, Kabataan, ACT Teachers and Gabriela that previously won a temporary restraining order from the Supreme Court that stopped the Energy Regulatory Commission from implementing a P4.15 per kilowatt-hour hike in electricity rates in areas serviced by the Manila Electric Co.

The hike was supposed to be implemented on a staggered basis beginning this month.

In pushing for the VAT exemptions for water, electricity and the oil industries, the bloc stressed that the imposition of VAT has greatly reduced the buying power of the public, especially those who are earning below the minimum wage.

The proposal is contained in House Bills 343, 344, and 345 or The Acts to Exempt Water Services, Electricity, and Petroleum Products from VAT.

The bloc said the measures would remove an additional tax burden that has unduly raised the costs of basic services and utilities.

With regard to Coloma’s fears that the measure might cast a negative effect on the budget because VAT earning run into billions of pesos, the proponents of the measure maintained that revenue losses to be incurred would be offset by the increased purchasing power of each consumer. Also, it would lead to cheaper production costs that would eventually promote equity, which is a key to economic growth.

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