DOF eyes adjusting tax expenditures fund once GOCC VAT exemption is scrapped

To help government-owned and controlled corporations (GOCCs) compensate for additional costs to be incurred once their value-added tax exemption is lifted, the Department of Finance (DOF) is looking at adjusting the tax expenditures fund (TEF).

TEF is a form of subsidy to support state-owned firms and agencies in their import requirements.

"We will adjust the tax expenditures fund to cover additional taxes GOCCs will need once their VAT exemptions are lifted," Finance Undersecretary Karl Chua said during the Senate Ways and Means Committee hearing on the first package of the government's comprehensive tax reform program.

Chua said that TEF for GOCCs will be part of the general appropriations for 2018, which is currently at P19.5 billion.

To determine how much will be needed for the TEF adjustment, the Finance official said he asked GOCCs for a report on how much additional money would needed once VAT exemptions are scrapped.

On the sidelines of the hearing, Chua told reporters that all government agencies and GOCCs may apply for tapping the TEF.

"They have to show that its valid... If they apply for a valid use then we will approve it," Chua said.

He clarified that only VAT exempted purchases of GOCCs would be lifted.

"We won't touch investments, contributions," Chua said.

VAT exemptions will remain for agriculture, raw food, education, and health.

"We don't think that VAT exemptions are the best way to help sectors," Chua said.

He emphasized that in a perfect VAT system of 12 percent, the government should have collected P1.4 trillion in 2016 – but only collected P623 billion.

"We collected P623 billion in VAT last year, just 4.3 percent of GDP (gross domestic product) and 30 percent of total tax revenues," he said. — VDS, GMA News