No to expansion of the value-added tax coverage

With VAT increase, government is asking workers to cough up more, when it should find the money somewhere else. We stand in resolute opposition against the proposed expansion of the value-added tax coverage and its 2-step increase from the current 10% to 12 and 14% over the next two years.

It is a sign of desperation and utter incompetence for the government to shore up its ailing finances by reaching deeper and deeper into the pockets of its citizens. The VAT makes no exceptions between rich and poor, and thus defeats the goal of an equitable taxation system.

In 2004 alone, there was an estimated 59% collection gap in VAT, which clearly demonstrates that the problem still remains with tax collection and administration. For as long as the government turns a blind eye to the inefficiencies and corruption that underlie the underperformance of its revenue generating agencies, then we fear that tax measures such as the VAT rate increase will only continue to line up the pockets of a few while the broader ranks of workers everywhere will continue to foot the bill.

The cost of living in Metro Manila alone is already somewhere north of P500, and continues to rise. A VAT rate increase will only end up being paid for by workers as this regressive tax finds its way to products that are socially sensitive. Experience has shown that, the VAT is prone to abuse, thru under-declaration of sales and over-declaration of claims for input-VAT.

Government is well advised to plug the loopholes first before imposing even more taxes. Lately, it has been reported that 22 independent power producers (IPPs) coughed up a combined total of P6 billion or so in taxes last year, a figure scandalously no more than a fourth of the amount which the million or so government employees alone shelled in taxes for the same period. And yet these IPPs, with their lucrative and shady deals, continue to rake in the profits with their take-or-pay agreements and other subsidies, while workers
everywhere continue to subsidize their greed. How government can keep mum to this injustice is inconceivably absurd.

The Alliance of Progressive Labor believes that a two-pronged approach may offer a more viable and less painful way out of the fiscal blunder, which the government seeks to evade by passing on the burden to the people. The bankruptcy of its liberalization program, resulting in massive losses after tariffs were lowered into indecent levels that were much more than required, even by the standards among the economic blocs were we have commitments.

A study conducted by the Labor Education and Research Network (LEARN) has shown that the real problem is not the fiscal deficit but the jobs deficit! Thus any proposed solution to the so-called fiscal crisis must not be at the expense of jobs generation! New tax measures (and spending cuts) will force the economy to contract. An economic contraction simply means fewer jobs when joblessness is already high and rising further. It means lower incomes when real incomes are already falling. It means greater poverty in the midst of widespread poverty!

Government should take a second, much harder look at these IPP contracts and take a more aggressive stance against those that are grossly disadvantageous to the public.

If the government is truly serious in looking for money, then it has to scrap the VAT expansion, find that money somewhere else, and stop picking on
helpless workers everywhere.

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