Press Releases

Regarding Waiving of VAT

November 15th, 2022

I am generally lukewarm to the idea of revenue-negative measures given our fiscal space. A credit rating downgrade will throw a wrench at the exceptional economic growth the Marcos administration is poised to achieve this year. The Makabayan bloc’s measure is revenue-negative. And, most of the tax benefits will accrue to those who consume more (i.e. higher-income households)

It will cost a total of at least P187 billion in foregone revenues, and that will certainly hamper our fiscal and economic recovery efforts, without a corresponding or equivalent revenue measure to make up for it. 

That is why the instruction was to STUDY the measure, along with other alternatives.

And, just to clarify, because my statement on the side yesterday seems to have taken a life of its own. The government has asked my committee to study the VAT measure along with a host of other options, including a cap on systems losses, energy efficiency measures, targeted subsidies, among others. The idea is we come up with the best option that costs the government less and actually reduces the water and electricity bill. 

I even cited the MWC/Maynilad approach, where their franchise effectively exempted consumer bills from VAT without exempting the companies from input VAT.  A franchise tax was also imposed on the companies. That meant they paid roughly the same total in taxes while also reducing consumer bill. That also reduced profits for these companies, as they can’t pass on their input VAT to consumers.  That can be an option, but it will require legislation and dialogue with the companies who will inevitably get hit.

The point is, somebody else has to pay, when we reduce another sector’s tax bill. That’s why we are closely studying all options, so that we arrive at a fair solution.

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