Press Release
November 14, 2012

Toll rates bearable if VAT was not imposed

If only you had listened.

This was the reaction of Sen. Ralph G. Recto to the reported plan of government to subsidize the operations of privately-run toll roads, including toll fees, to ensure the profitability of the investing firms and soften the impact on motorists.

Recto on Monday said with a 12-percent Value Added Tax (VAT) on toll fees and the expected new wave of increases in toll rates next year, the motorists should brace for an unprecedented higher toll rate regime.

"As early as 2010, I have been saying not to VAT toll rates because it was not the intention of the law, that it would drive up the rates and burden the motorists," Recto, chair of the Senate committee on government corporations and public enterprises, said.

He said the government would never have to think of subsidy for toll companies had it not stubbornly insisted on slapping toll fees with a 12 percent VAT contrary to the stand of lawmakers who shepherded the law.

The senator, with the backing of Senate President Juan Ponce Enrile and his colleagues, had maintained during hearings last year that toll fee was not in the list of "VATable" items when Congress legislated the law.

"Now they're beginning to realize the folly of slapping toll rates with VAT and are now considering subsidy to lure in more investors and appease motoring public," Recto said.

Recto said the supposed billions in revenues to be collected from VAT on toll fee would be washed away by the billions in subsidy to be extended to toll road operators.

He said the proposed subsidy to toll roads is also on top of proposal to extend toll operators income tax holidays (ITH) as a come-on for other groups to invest in the country. Transportation Secretary Jose Emilio Abaya was quoted in news reports that government considers extending subsidy to private toll road companies to guarantee their investments and lure more players in infrastructure projects.

Currently, however, toll firms are already assured of a 15 percent guaranteed return of their investments.

Five toll road operators, handling North Luzon Expressway, Subic Clark Tarlac Expressway, Metro Manila Skyway, Southern Tagalog Arterial Road, and Manila-Cavite Expressway are poised to increase their toll by the start of 2013.

The toll operators have applied with the Toll Regulatory Board (TRB) for an increase in their rates from 10 percent to 33 percent, which could go up to a high of 50 percent if the income tax holiday (ITH) incentive is not approved.

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