VAT Exemption Can Worsen Inflation

Albay Rep. Joey Sarte Salceda, current Chairman of the House Committee on Ways and Means has advised the unplanned effects of the proposal exempting sugar and other commodities from the 12% Value-Added Tax (VAT).

Rep. Salceda has said that this proposal filed by the Makabayan bloc in the lower chamber will only aggravate inflation.

Salceda made his statement after lawmakers filed House Bill (HB) 5504. The said bill aims to remove VAT on the importation and sale of the following commodities: laundry soap and detergents, bread, charcoal, candles, bread, canned goods, sugar (raw and refined), cooking oil, and biscuits. This bill would also VAT exempt the sale and importation of drugs classified by the Department of Health (DOH) as essential.

Rep. Salceda has mentioned that Committee will study the bill but “we are of the disposition that the government needs more, not less revenues.”

“It’s going to make things worse, not better. When the British government announced its largest tax cuts in 50 years, the British pound also slid to all-time lows against the dollar. That’s because tax cuts cast a shadow of doubt on the ability of a state to maintain its operations and honor its debts,”  he said.

“Peso weakness is not yet our fault: we’re still fundamentally strong,” Salceda added. “And, in any case, the peso is getting stronger against other major currencies like the yen, euro, or the pound. But the moment we cut taxes, the resulting peso weakness will be our fault.” added Salceda.

Source: Business Mirror