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Republic of the Philippines

HOUSE OF REPRESENTATIVES TWELFTH CONGRESS Second Regular Session

HOUSE RESOLUTION No. 995 ____________________________________________________________________________ Introduced by Reps. SATUR C. OCAMPO, CRISPIN B. BELTRAN, LIZA L. MAZA ERNIE D. CLARETE, ROSELLER L. BARINAGA, BERTHOBAL R. ANCHETA, LEOVIGILDO B. BANAAG, ALIPIO V. BADELLES, OSCAR L. GOZOS, TED FAILON, DIDAGEN P. DILANGALEN, CONSTANTINO G. JARAULA, FILOMENA S. SAN JUAN

____________________________________________________________________________ RESOLUTION DIRECT I NG THE COMM I T TE E ON WAYS AND MEANS TO INQUIRE, IN AID OF LEGISLATION, INTO THE CONTINUED ADOPTION OF THE VALUE- ADDED TAX (VAT) SYSTEM IN LIGHT OF ITS INEQU I TY, REGRESSIVENESS, ABUSE BY LARGE TAXPAYERS AND PROBLEMAT IC ADMI N ISTRAT IO N AND TO RECOMMEND APPROPRIATE LAWS AND MEASURES TOWARDS A MORE PROGRESSIVE AND REVENUE- GENERATI NG TAX SYSTEM, IN THE MEANTI M E DEFERR I NG THE LIFT I NG OF THE VAT EXEMPTIO N ON PROFESSIONAL SERVICES TO AVOID IMPOSING YET ANOTHER TAX BURDEN ON THE PEOPLE W HEREAS the value-added tax (VAT) was first levied on goods, with some exceptions, in 1988 through Presidential Decree 273 of President Corazon C. Aquino and its coverage expanded to cover most types of services through the Expanded VAT Law in 1997; W HEREAS the VAT is a business tax in which sellers add ten percent (10%) to the prices of the goods, properties, and services sold to consumers for subsequent remittance to the government; W HEREAS the VAT is thus an indirect tax passed on to and borne by consumers that is regressive in not distinguishing between the poor and the well-off who have different capacities to pay; W HEREAS following the expiration on December 31, 2002 of the VAT exemption on the services of professionals since 1997 provided under the National Internal Revenue Code, as amended, the Department of Finance and the Bureau of Internal Revenue issued Revenue Regulation No. 1-2003 on January 2, 2003 imposing a 10% VAT on the said services starting this year; W HEREAS the revenue regulation will result in a 10% increase in the prices of medical, dental, hospital, veterinary, entertainment, legal, accounting and other professional services previously not covered by VAT. In turn, the government is hoping to raise about P8.6 billion in revenues annually to reduce the ballooning national budget deficit; W HEREAS the resulting increase in the prices of professional services will, directly and indirectly, impact the worst on the 70% of Filipinos who are poor and have the least capacity to pay. The Department of Trade and Industry on January 21, 2003 already warned consumers to brace for sharply higher prices of basic commodities because of successive increases in oil


prices and the weakening of the peso; W HEREAS a much bigger reason for the government’s revenue problems than the exemption from VAT of professional services are its distorted pro-globalization policies unduly biased towards foreign investors and big business with, for instance, the Congressional Planning and Budget Office reporting that:  P263.1 billion in revenues were waived from 1993-2000 (or P32.88 billion per year) due to various fiscal incentives and tax exemptions; and  P80-100 billion has been forgone annually since 1998 due to tariff reductions. W HEREAS on top of these are also the uncounted billions in pesos lost annually through the government’s inability to curb the rampant graft and corruption in all of its agencies and instrumentalities; W HEREAS in any case, problems in administration persist with the VAT evasion rate ranging from 51% to 63% in 1992-2000 and a huge gap between the VAT effort in 1998-2000 of only 2.3% compared with the statutory rate of 10%, especially due to abuses by large taxpayers who over-deduct input tax credits while still charging the VAT to ordinary consumers; W HEREAS the imposition of the 10% VAT on the services of professionals will only worsen the already regressive and inequitable VAT system that disproportionately burdens poor consumers; W HEREAS it is timely to consider the possibility of repealing the VAT laws and to study the various options for a more progressive and revenue-generating tax system; NOW THEREFORE, BE IT RESOLVED, AS IT IS HEREBY RESOLVED to direct the Committee on Ways and Means to inquire, in aid of legislation, into the continued adoption of the Value-Added Tax (VAT) system in light of its inequity, regressiveness, abuse by large taxpayers and problematic administration and to recommend appropriate laws and measures towards a more progressive and revenue-generating tax system; FURTHER RESOLVED that pending result of such an inquiry, the lifting of the VAT exemption on professional services be further deferred to avoid imposing yet another tax burden on the people.

Adopted, SATUR C. OCAMPO

CRISPIN B. BELTRAN

Bayan Muna–Party-List

Bayan Muna–Party-List

LIZA L. MAZA Bayan Muna–Party-List

ERNIE D. CLARETE

ROSELLER L. BARINAGA

Misamis Occidental, 1D

Zamboanga del Norte, 2D

BERTHOBAL R. ANCHETA Bukidnon, 2D

ALIPIO V. BADELLES Lanao del Norte, 1D

LEOVIGILDO B. BANAAG Agusan del Norte, 1D

OSCAR L. GOZOS Batangas, 4D


TED FAILON Leyte, 1D

DIDAGEN P. DILANGALEN Maguindanao, 1D

CONSTANTINO G. JARAULA

FILOMENA S. SAN JUAN

Cagayan de Oro, LD

Zamboanga del Sur, 2D


HR 995 - VAT