Press Release
February 7, 2006
PIMENTEL: HIGHER VAT WILL DEVASTATE THE POOR
Senate Minority Leader Aquilino Nene Q. Pimentel, Jr. (PDP-Laban)
today debunked the claim by administration economic managers and
spokesmen that the hike in the Value Added Tax would affect the rich
more than the poor.
Pimentel also said the increase in the VAT rate and expansion of
coverage of VAT were imposed by the government due to pressures from
the International Monetary Fund and other foreign lending
institutions to ensure the payment of the countrys loan
obligations.
He dismissed as hogwash the administrations claim that the higher
VAT would result in minimal increase in prices of prime commodities
citing the common complaint of housewives that their marketing
budget could buy less and less goods due to spiralling prices.
The Filipino poor are now in a survival mode, and any increase in
sales taxes on almost all commodities, such as the Value Added Tax
(VAT), are bound to push the poor further down below the survival
watermark, Pimentel said. So the poor, who consist of around 70
percent of the population, are at the point of drowning, Pimentel
said
He pointed out that while the daily living wage for a family of six,
the average family, was placed at P619.20 by the National Wages and
Productivity Commission (NWPC) as of December 2005, the daily
minimum wage was pegged at only P222.29 per day.
So even without the two percentage point increase on top of the 10
percent VAT, the average Filipino family was already below the
survival threshold, said Pimentel. However, he averred, the rich
could easily absorb the additional tax because of their much higher
incomes.
The rich have flexible income based on production, trade and
services, and the increased VAT would not really affect them as they
merely attach the tax to the price of the goods and services that
they sell, Pimentel explained. However, more families would fall
into the poverty net as they would not be able to cope with the need
for increased expenditures.
He also ridiculed the claim of government spokesmen that the
additional tax to be raised by the 12 percent VAT would go to more
government spending on infrastructure and social services, thus
leading to more employment and income.
The truth is that about 70 percent of the additional revenue would
go to the payment of the public debt, especially foreign loans, to
enable our government to borrow more money abroad which in the
future would only necessitate more taxes and more remittances from
our foreign workers, said Pimentel. Only a measly 30 percent will
be used for productive expenditures.
He further declared, The fact is the Filipino standard of living
has been going down as reflected by the increase of expenditures
over income of the average Filipino. In 2003, the total family
income increased by 11 percent over that of year 2002, but the total
family expenditure increased by 13 percent.
Thus, as per NWPC survey released last January 12, average income
rose by only 1.9 percent, while average expenditure increased by 4.1
percent. Thus average family saving dropped by 7.9 percent.
With higher taxes, Pimentel said, the average family will be faced
by higher expenditures and more insufficient income, thus forcing
families in the lower middle classes to fall into the poverty net.
Pimentel also expressed fears that part of the increased VAT
collections will be diverted to dubious activities intended to prop
up the Arroyo presidency such as Charter Change and wholesale
bribery to politicians, as well as military, police and election
officials, in the same manner that the fertilizer fund and portion
of the recovered Marcos loot were siphoned off to the Presidents
election campaign in 2004. |