Suspension of VAT on basic goods to ease impact of inflation —Imee

Ilocos Norte Governor Imee Marcos claimed on Sunday that suspending the Value Added Tax on basic commodities for a year would help more Filipinos cope with the impact of skyrocketing inflation.

In a statement, Marcos said she favors suspending the VAT over deferring the second tranche of excise taxes in 2019.

She argued, "The suspension of the VAT would provide immediate relief to Filipino consumers. [Whereas], Suspending the VAT on basic food items, fuel, and electricity would only counteract the strong inflation pressures on these goods."

Marcos cited Philippine Statistics Authority report indicating that "basic food items such as rice, fish, meat and vegetables have been major drivers of inflation this year, with the contribution of rice alone rising 10 times to 1 percentage point of the inflation rate." 

Dealing with VAT revenue loss

VAT revenues accounted for a fifth of overall tax revenues of the country, according to Marcos.

She, however, said that the rising tax revenues resulting from the Tax Reform for Acceleration and Inclusion (TRAIN) Law could make up for the potential VAT revenue loss amounting to approximately P365 billion, in the case of a 1-year VAT suspension.

"TRAIN Law excise taxes will contribute P85 billion while running after tax evaders more vigilantly could add another P25 billion to compensate for the potential revenue loss if VAT is suspended," Marcos said.

Other measures she mentioned that will help cover the supposed revenue loss include:

• improving the income tax collection, poised to earn P102 billion in 2018 and P113 billion in 2019;
• increasing the government agencies' absorptive capacity, citing a projected P140 billion spending deficit for the whole year; and
• abolition of the National Food Authority, which she said will add another P7 billion.

“Since VAT revenues can be covered by these measures, the numbers indicate strong evidence to justify the suspension of VAT,” Marcos said.

Last week, the government decided to suspend the implementation of the second tranche of excise taxes on oil products for 2019, in efforts to curb inflation. —Dona Magsino/LBG, GMA News