Press Release
February 5, 2018


Akbayan Senator Risa Hontiveros on Monday said the government must view the proposal to cut the rate of the value added tax (VAT) as an investment in the poor rather than simply a loss of revenue.

The Senator made the statement after the Department of Finance (DoF) expressed openess to her proposal to reduce the VAT under the condition that all exemptions are lifted.

"While I am glad that the DoF is open to the idea of cutting the VAT rate, I am worried that the condition of lifting all VAT exemptions, regardless of its negative impact on the poor, would cancel out whatever benefits a reduced VAT rate would provide our poor people," Hontiveros said.

"Maraming mga vulnerable sectors ang kailangan pang tulungan at protektahan gaya ng mga senior citizens, persons with disabilities (PWDs) at small and medium-scale cooperatives," Hontiveros added.

"New set of lenses"

Hontiveros said that the government must view the proposal to cut the VAT rate from a new set of lenses.

"Instead of simply seeing this as a revenue loss, it must treat this as an investment. Wala namang matatapon dito. Mapupunta pa rin sa mamamayan, lalo na sa mga mahihirap. We are investing in our people, strengthening their purchasing power and contributing to the effort to redistribute wealth," she explained.

Hontiveros also downplayed the government's "doomsday scenario" that a lowered VAT would hurt its P8-trillion infrastructure program as the DoF expects tax reforms to generate P130 billion in revenues.

"The finance department itself projects P 130 billion in revenue gains from the Tax Reform for Acceleration and Inclusion Law (TRAIN), so the doomsday scenario being predicted by those who insist on a 12% VAT is unlikely. In the end, the goal of a lowered VAT rate is to provide relief to our citizens reeling from the effects of TRAIN, especially those in the informal economy who did not enjoy income tax reduction, or minimum wage earners who don't pay income tax anyway, but are made to bear new burdens from consumption tax hikes," Hontiveros said.

Last week, Hontiveros filed Senate Bill No. 1671 or the "Bawas VAT Bill" cutting the VAT rate as relief for poor families adversely affected by the TRAIN law. The measure seeks to enforce a progressive reduction in the VAT rate reducing it to 10% effective January 1, 2019.

By January 1, 2022, the measure will again reduce the rate of VAT to 8% should the previous year's realized revenues from VAT reported in the budget of expenditures and sources of financing submitted to Congress equal or exceed four point five percent (4.5%) as a percentage of Gross Domestic Product (GDP). This will align the country's tax system with the ASEAN region.

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