Press Release
July 23, 2010

Recto cautions BIR against rushing VAT on toll sans clear legal basis

Sen. Ralph Recto today cautioned the Bureau of Internal Revenue (BIR) against rushing its imposition of 12 percent Value Added Tax (VAT) on tollway operations without first laying the legal groundwork for it.

Recto said the BIR must seek clarification from the original framers of the law if it was really their intention to impose VAT on tollway operations.

"But during the deliberations of the measure, the imposition of VAT on tollway operations was never discussed because it was never the intention of the framers of RA 9337 to impose VAT on tollway operations," he said.

The senator added that imposing VAT on toll fees after so many years of procrastination might be construed as a new tax imposition under the new government.

He said the imposition of VAT on toll fees will consequently increase the costs of agricultural produce, bus fares, and basic goods being transported to and from the provinces, which would further burden the plight of the poor.

"Motorists, especially those using the SLEX, are in for a double whammy since the imposition VAT on toll fee next month coincides with the start of the 250-increase in the toll rates in SLEX," Recto said.

He said this would take away some political capital from the new government, whose "no-taxes" campaign promise was among those which reverberated and resonated with the tax-weary electorate.

"There is a need to determine if the BIR's move is tantamount to imposing a new tax in the face of President Benigno Aquino III's recent statement that his administration will not impose new tax measures on the Filipino people," Recto said.

He added: "The BIR cannot just arbitrarily impose a VAT on tollway operations by virtue of its interpretation of the law." Recto likewise said even former Rep. Rene Diaz, principal author of the Comprehensive Tax Reform Act and author-sponsor of the E-VAT law, disagrees with the BIR that toll fees are subject to VAT.

According to Diaz, imposing 12 percent on toll fee imposed on motorists using the expressways is double taxation. Diaz said a toll fee is an imposition of government for the use of the expressways, therefore, to impose a tax on a tax is double taxation.

"If the main author of the law says otherwise, where is the BIR drawing its legal wisdom from?" Recto said. Recto will file a Senate Resolution asking the Senate ways and means panel to probe BIR's legal basis in imposing a VAT on tollway operations.

The BIR, hard-pressed to shore up revenues to plug a swelling budget deficit, is imposing the VAT on toll starting August 16, which it expects to bring in P1 billion in fresh revenues monthly.

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