House of Representatives Eyes Prioritization of VAT on Digital Services

Late last week, a senior legislator disclosed that the House of Representatives plans to prioritize a 12% value-added tax (VAT) on digital transactions and ease of paying taxes programs in the current Congress. Albay Rep. Jose Ma. Clemente Salceda, heading the House Ways and Means Committee, stated that budget reform is also being considered.

The representative also disclosed that inflation is “the greatest challenge to this administration’s first year in office,” on top of income security and food adequacy. “We are also studying measures to combat technical smuggling, as brought up by the President in his State of the Nation Address (SONA),” Salceda noted.

Michael Ricafort, Rizal Banking Corporation’s Chief Economist, explained that “new tax measures or higher tax rates could lead to higher inflation, as seen in the past, such as the TRAIN Law in 2018.” Ricafort furthered that “Any new taxes or higher tax rates could add to the current inflationary pressures and would lead to higher headline inflation…New taxes and higher tax rates need to be fair, equitable, and progressive, especially targeted at those that can afford them or those from the higher income brackets or those that at least do not add to the burden to the poor, the most vulnerable sectors, and/or those hit hard by the pandemic.”

Once food security and income issues are tackled, “housing should be atop the President’s priorities… That’s the single biggest untapped source of household and national wealth,” Rep. Salceda elaborated. Alternatively, the government risks being received negatively by the public due to proposed new taxes, according to University of the Philippine political science professor Maria Ela L. Atienza. “A recent SWS survey also found out that more Filipinos feel poorer or worse off now than before,” she noted. “Pulse Asia surveys also show that people are mainly concerned with economic issues like unemployment, poor pay, and inflation.”

“Add to this is the fact that the current President (Ferdinand R. Marcos, Jr.) and his family still have issues regarding their tax liabilities and ill-gotten wealth,” said Atienza. However, should the government fall short of its promise to address rising prices, protests are not expected until the administration loses popular support.

Source: BusinessWorld