VAT cut, tax breaks on basic commodities to 'make things worse' —Salceda

Albay Representative Joey Salceda on Thursday warned against proposals to grant value added tax (VAT) exemptions and other tax breaks to sugar and other basic commodities.

"It's going to make things worse, not better," Salceda, who chairs the House ways and means committee, said in a statement.

Citing the experience by the British government, Salceda said tax cuts cast a shadow of doubt on the ability of a state to maintain its operations and honor its debts."

"When the British government announced its largest tax cuts in 50 years, the British pound also slid to all time lows against the dollar," said Salceda, who is also an economist.

He said the present weakness of the Philippine peso "is not yet our fault." However, he added that "the moment we cut taxes, the resulting peso weakness will be our fault. We will have to pay more pesos for our imports."

Measures pending before Salceda's panel seeking VAT exemption and other tax breaks cover essential goods, inputs, raw materials; drugs and medicines prescribed for mental health conditions; and fertilizers and pesticides used in rice, corn and sugar production.

Salceda  maintained such tax breaks will result in price hike for the country's imported inputs, like fuel.

"We have to be careful about a VAT cut," he said. "We are of the disposition that the government needs more, not less revenues. We have also committed to the President that all expenditures, spending or tax, will have to be matched by corresponding new revenues,"

"Current proposals are not backed by new sources," Salceda added.

Instead of VAT cuts, Salceda said the government should provide subsidies for buying fertilizer to address food supply issues.

Good fertilizers, he said, are still the most cost-effective way to increase food supply despite higher fertilizer costs.

Salceda vowed to engage in a series of conversations with counterparts in agricultural agencies in Thailand, Taiwan, and other regional neighbors to see how else the country can mitigate inflation with improved food security. —Llanesca T. Panti/KBK, GMA News