Press Release
August 14, 2010

Enrile welcomes SC TRO on VAT on toll fees, says it's illegal exaction

Senate President Juan Ponce Enrile welcomed the issuance of an injunction by the Supreme Court on the imposition of VAT on toll fees by the new administration, reiterating his position that the tax is an illegal exaction by the government on the people.

Enrile said toll fees are in the nature of taxes. Therefore, toll fees paid by vehicle users already constitute a tax for the use of the roads owned by government.

"It is the function of government to provide for the road system in this country. In the case of the Subic-Clark-Tarlac Expressway, it is the government that constructed the road with the use of government money and it is the government that collects toll. In the absence of funding from the government, we allow the private sector to build roads and operate a toll system so they can recover the cost of construction."

"It will be foolish for the government to VAT its own collections or to impose a tax on a service which should be provided by the government in the first place," Enrile explained.

The Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular No. 63-2010 last July 19 citing Section 108 of the National Internal Revenue Code, as amended, as the legal basis for the VAT on toll fees. The same circular specifies that input VAT account of toll operators to have zero balance as of August 16 and allows the same to apply for abatement of tax liability.

Enrile expressed his opposition to the said policy, pointing out further that the BIR cannot forego the back taxes of toll companies. "In the event the imposition of VAT is justified, under what authority can the BIR forego prior VAT liabilities? The BIR should issue an assessment against operators for all their VAT liabilities," Enrile asked.

Enrile urged the new administration to study such policy "very carefully because it is the people who will ultimately be burdened by such imposition of the government. It's good that the Supreme Court afforded us more time to study the issue very thoroughly."

The Senate Chief also questioned the rounded-up rates issued by the Toll Regulatory Board (TRB). The TRB said that if the toll to be collected is P12.69, motorists will be asked to pay P13.00 instead. Enrile said the BIR and TRB are "arrogating unto themselves the function of Congress."

Although they were given delegated power, Enrile said they cannot continue what they are doing without clear authority from Congress.

Enrile further pointed out that the VAT on toll may even go against the non-impairment clause of the Constitution since VAT is not part of the toll operation agreements between the government and toll companies under the Build-Operate-Transfer contracts.

"If we do not study this issue carefully, and decide to push through with the imposition of VAT, we may even be putting the government at risk, exposing the government to possible legal liabilities," Enrile said.

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