Press Release
August 9, 2010

Recto to BIR, TRB: Justify first VAT on toll and rate hike

Sen. Ralph G. Recto yesterday urged the Bureau of Internal Revenue (BIR) to defer the plan to impose the 12-percent value-added tax (VAT) on toll fees and the 250-percent toll rate increase in the Southern Luzon Expressway (SLEX) on August 16 until issues surrounding its propriety have been sufficiently discussed and explained to the people.

"The government should not take the fast lane on the proposal to impose the VAT on toll fees, especially if it means an additional burden to those who use our tollways. Aside from the legal and even constitutional questions regarding its imposition, the VAT on toll fees also poses administrative difficulties in its implementation," Recto, chairman of the Senate Committee on Ways and Means, said after meeting with officials of the Toll Regulatory Board (TRB) yesterday morning.

"These do not even factor in the political implications of the plan, as the Aquino administration has promised not to impose new taxes, at least not in the immediate future. And however you look at imposing the VAT on toll fees, it would still be seen as a new tax."

He said his committee has already scheduled a hearing on the matter this Thursday in order to provide all those concerned, including those who oppose the plan, a public forum where all questions regarding its propriety are answered and thoroughly discussed.

The senator said if the BIR declines to defer its plan to impose the VAT on toll fees, then he advises the motoring public, particularly those using the SLEX, to brace for an enormous increase in toll rates.

"For the SLEX users, August 16 also marks the implementation of the 250-percent increase in toll rates. If we include the imposition of the VAT, then the corresponding amount represents a 286-percent hike," Recto said.

If the 250-percent toll rate increase in SLEX is imposed on Monday, coupled with the 12-percent VAT, Class 1 vehicles using the 30-kilometer stretch from Alabang, Muntinlupa City to Calamba City in Laguna will be paying around P86 from a previous P22, or a 286-percent increase.

He explained that no less than Senate President Juan Ponce Enrile said imposing the VAT on toll fees is illegal and has no basis in law.

Enrile, a tax-law expert and a former chairman of the Ways and Means committee, earlier said toll constitutes a "user's tax" for the use of roads belonging to the government and such, it is not "VAT-able."

"And I fully agree. This is one of the reasons we never imposed a VAT on toll when we passed the Expanded Value-Added Tax law in 2005, the same law now being used by the BIR to justify its plan," Recto explained.

He added that nowhere in the 2005 law states that Congress lifted the exemption of toll fees from VAT because it was extremely impractical to impose such a tax on toll.

Recto said things get more complicated in the case of the SLEX, whose operator is partly owned by the Philippine National Construction Corporation (PNCC), a government entity.

"This is aside from the fact that the government, using taxpayers' money, paid for the right-of-way in SLEX. So a part of the income coming from the toll fees in SLEX goes to government," he said.

He also said the same holds true in the case of the Subic-Clark-Tarlac Expressway (SCTEX), which is wholly owned by the government because it was built through a foreign loan to be paid also by taxpayers' money.

"Are we now saying that we are imposing the VAT on government income? This is why this plan is being opposed because it is so complex and intricate in so many levels that there is a need to ventilate all the issues in a public forum," he said.

The senator encouraged all those invited to the Thursday hearing of the Senate Committee on Ways and Means, especially those in the BIR, the Department of Finance (DOF), the TRB and the Department of Transportation and Communications (DOTC), to attend and explain the wisdom behind imposing the VAT on toll fees.

"Because of the urgency of the matter at hand, the Committee found it necessary to schedule the first hearing before August 16. I hope high officials of the DOF, DOTC, BIR and the TRB will be able to attend the hearing despite the short notice," he said.

The BIR had earlier announced it will start collecting the VAT on toll fees on Monday with the hope of raising over P1 billion in revenues.

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