Friday, 6 August 2010

Gov’t eyes P240 billion from VAT next year

Manila Bulletin

The Department of Finance (DoF) has set a bigger collection target of P240.7 billion from the 12 percent value added tax (VAT) next year, up 15 percent from its P209.7 billion revised target set this year.

Finance department data showed the P31 billion expansion would come from increased consumer spending on the back of higher gross domestic product (GDP) growth target of between 7 percent and 8 percent.

The DoF originally pegged a lower consumption tax goal this year at P199.2 billion due to expected continued slump in the economy as a spill-over of the global financial meltdown.

But the government now expects the economy to grow by around 5 percent to 6 percent this year from the original target of 2.6 percent to 3.6 percent.

The government also maintained this year and next year's inflation targets of 3.5 percent to 5.5 percent and 3 percent to 5 percent, respectively

Last year’s VAT collection was short of its full-year target of P195.98 billion.

Republic Act 9337 or the Expanded Value-Added Tax Act, passed in 2005 as part of the Arroyo administration’s efforts to put its fiscal house in order, raised the rate from 10 percent to 12 percent and increased the corporate income tax rate from 32 to 35 percent.

Former Finance Secretary Margarito B. Teves had urged the Aquino administration to raise the VAT rate from 12 percent to 15 percent to narrow the record budget deficit program of P325 billion.

But President Aquino said he will not raise VAT just to shore up government revenues, citing he instead plans to run after tax evaders to boost state revenue and cut the budget deficit.

Initial estimates from the DoF showed the increase in VAT would generate an ultimate windfall of about P73.92 billion yearly if VAT rate is increased gradually from the current 12 percent to 15 percent in the next five years.

The increased revenues are expected to be realized even if the corporate income tax of 30 percent is reduced to a final 25 percent by 2013.

An increase in VAT to 13 percent next year with the reduction of corporate income tax to 28 percent would bring in fresh revenues of P11.33 billion.

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