SENATOR Panfilo Lacson said Sunday the government can still generate at least P1.7 trillion in revenues next year even if the rate of value-added tax is lowered to 10 percent.
He had earlier proposed to reduce VAT to 10 percent from the prevailing 12 percent, which has been implemented since 2006.
In an interview on radio dzBB, Lacson said the projected P1.7 trillion comes by taking 10 percent of the expected nominal gross domestic product or GDP of P17 trillion.
Nominal GDP is the value of goods and services that the country produces in a year without adjustments for inflation.
“If we have the 12 percent VAT, the government can generate P2 trillion. So I said we can lower it to 10 percent, if it is clear that the government can get more than P1.7 trillion from VAT alone, setting aside other government revenues,” Lacson said.
He also recommended reducing the existing 143 tax exemptions to 78 to compensate for the expected losses from the reduction of the VAT rate.
If not for the many exemptions under the special laws passed, he said, the government should have more collections from taxes. But he said exemptions covering food, agriculture, health, and education will remain.
Lacson said his proposal was included in the individual amendments to the pending tax reform bill being heard by the Senate ways and means committee, chaired by Senator Juan Edgardo Angara.
He expressed hope that his colleagues in the Senate and House lawmakers would support his proposal.
The senator said the Philippines had more tax exemptions than its neighbors Indonesia, with 37, Thailand with 35, Vietnam with 25 and Malaysia with 14.
Lacson also said his proposal to cut the VAT rate was “most welcome” to Senator Ralph Recto, the principal author of the expanded VAT law implemented in 2006.
He said his proposal will also help Angara, who is seeking a reelection in the 2019 midterm elections.
“He [Angara] said he does not see any problem. I even told him, this is political. He will run 2019. You are the chairman of the ways and means. You can just imagine, this reduction from 12 to 10 percent will be credited to you. You are a sure winner,” said Lacson.
He recalled that Recto lost in the 2007 election due to the hike in VAT rates from 10 percent to 12 percent.
Angara said the Senate version of the Tax Reform for Acceleration and Inclusion (TRAIN) has met the revenue goal of the government after he introduced his amendments to Senate Bill 1592.
Based on the estimates by the Department of Finance, SB 1592, taking into consideration the proposed amendments, would yield P159.5 billion in revenue—a hundred billion more than the previous revenue estimate of P59.9 billion.
“We were able to meet the revenue target using the more comprehensive and accurate data that the DOF has provided the committee after the filing of the committee report,” said Angara.
The boost in the revenue was significantly sourced from the amendments to the provisions on the expansion of the VAT base. From the repeal of certain VAT special laws alone, the estimated revenue gain was raised from P14 billion to P45.5 billion.
Another major source of revenue is the doubling of the prevailing documentary stamp tax rates, which will yield about P40 billion.
Angara said mass housing projects that are worth P2 million and below located outside of Metro Manila will continue to enjoy VAT exemption under the Senate version of the Tax Reform for Acceleration and Inclusion bill.
Angara, chairman of the ways and means committee, said the Housing and Urban Development Coordinating Council estimated that from 2017 to 2022, the total housing need of the country has reached 6.58 million.
“We don’t want to widen the huge housing backlog. That’s why the Senate opted to keep the VAT exemption so as not to exacerbate the housing problem,” Angara said.
The original proposal of the Department of Finance sought to remove the VAT exemption of both socialized housing, which is priced at P450,000 and below, and of low-cost housing as part of its move to broaden the VAT base.
The Senate version retained the VAT exemption of all socialized housing both in and outside Metro Manila.
Senators JV Ejercito and Cynthia Villar have also pushed for the retention of this exemption.