| | WHY A VAT INCREASE IS NOT NECESSARY
Rasheed Abou- Alsamh’s article, “Manila Moods: Why a VAT increase is Necessary” discussed several points as to why the 2% increase of VAT would boost economic growth. Mainly, he outlined several reasons as to how the revenue the government gets from VAT payments would help support programs designed to alleviate poverty.
The points he raised were, though right in principle, weak and unsuitable for a country like ours. First, he alleged that VAT increase is a necessary bitter pill to give the President the basic funds to help lift needy Filipinos out of poverty. If we recall our history here, the VAT laws were inaugurated during the Ramos’ administration. They were seen as the primary solution to the problem of our foreign debts, not as funding for any sort of national program. A clause included states that the law would be abolished the moment that there was no longer a need for such. Ten years later, not only is the VAT law still effective, the foreign debt increased to unimaginable heights. And the painful thing here is that 80% of our foreign debts were not even used to benefit the common people.
Second, he assumed that the VAT increase would not really be a burden to the poor people since the products that the poor usually used would be taxed less. I would actually share the same opinion, if that was indeed the case. Unfortunately, Value- Added Tax is an indirect tax and, according to the laws of economics, shall be passed on to the ultimate consumers regardless of the consumers’ ability to pay, contradictory to the basic principle of progressive taxation.
Third, he supposed that there are no other means for the President to find funding for economic development and social welfare programs. A fellow Anak Bayan member had told me just yesterday that the Philippines is a rich country- if we took into consideration its natural resources. The same thing goes for our national treasury. The major reason why were having a budget deficit- aside, of course, from misallocation of funds, government overspending and massive government corruption- is inefficient tax collection. According to the data of SEC and BIR, an estimate of 50 billion pesos worth of taxes and 200 million pesos worth of VAT remain uncollected. Shouldn’t the government address these problems first before they ask the nation for more? Since, obviously, these are the real problems, not the imagined lack of funds.
As if to attest to the three previous points, he suggests that contrary to the belief of Anak Pawis, the growth of the country is not in production but in service. He follows up by declaring that we should make good use of our being attuned to the American Ways. Since 75% of the population are farmers, and rice is the staple food of the state, I can’t really see how we shouldn’t be dependent on agricultural production. Technological development is good, but to compromise our cultural heritage and sovereignty for the “American Ways” would be asking for too much. Add in the fact that we are among the top ten most corrupt country in the world, the idea would almost seem preposterous and next to impossible.
Abou- Alsamh concludes by claiming “the President realizes that growth is not benefiting the poor and wants to implement government programs that will give tools and opportunities for the poor Filipinos to develop and help themselves grow financially.” It is a good thought and I fervently agree. The President realizes, yes, but she chooses the wrong way to go about it. As to if it was done deliberately, I cannot say. One thing that is obvious though, the ratification of the new VAT law would defy the notion that the government works for the people.
The increase of Value- Added Tax is not an urgent solution to the financial problems of our country since upon closer examination: there are other more effective alternatives. Rasheed Abou- Alsamh was wrong in assuming that a short- term solution like the VAT would actually assuage the country’s economic crisis, much less eliminate poverty. In light of the present poverty and employment rates in the Philippines, it simply translates to higher prices of goods to consumers.
Rasheed Abou- Alsamh’s original article, “Manila Moods: Why a VAT increase is Necessary”
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