Sen. Panfilo M. Lacson Sr. confirmed on Thursday an emerging consensus in the Senate to back calls for the reduction of the value-added tax from 12 percent to 10 percent, along with a companion measure rationalizing existing VAT incentives.
“Yes. That is the primary reason why I cast a dissenting vote against TRAIN 1,” Lacson said, referring to the first package of the Tax Reform for Acceleration and Inclusion law, that took effect on January 1, 2018.
Interviewed at a Senate media forum, the senator admitted he initially forged an agreement with the Department of Finance to back the move to trim the list of VAT exemptions following findings of a “research or study done by my staff in close coordination with the DOF.”
“We came up with a formula to reduce [VAT] exemptions,” Lacson said, pointing out that “we have the most number of exemptions in the entire Southeast Asia.”
The senator surmised this is the reason there is no upsurge in the VAT collection despite the high rate, even as only a few benefit from the existing arrangement.
“So, I was batting for reduction of exemptions. Pinabawasan ko 143 ng 78, maiwan 65 at ’di lahat tatamaan din [I had them cut it by 78, from 143 exemptions down to 65—and not everyone will be hit],” Lacson said, adding: “Whenever we pass special laws [there are always] VAT exemptions [that are inserted].”
This, he explained, poses the “biggest challenge” to the Bureau of Internal Revenue: “Pagkolekta kasi ang daming technicalities, dito nandadaya ang taxpayer sa mga input VAT at sa exemptions. Having said that, kung nasunod sana amendments ko, nasuportahan ng aking kasamahan, we could have generated an incremental revenue of P117 billion, much more than ’yung tina-target ng TRAIN-1 kasi target ng TRAIN 1, nasa P80 billion to P82 billion [There are so many technicalities when they collect. Taxpayers can cheat here with the input tax and the exemptions. If they had followed my suggested amendments, we could have generated an incremental revenue of P117 billion, much more than what TRAIN 1 was targeting, at P80 billion to P82 billion].” For instance, Lacson recalled that “on VAT alone, had we reduced the number of lines of exemption from 143, we could have collected P117 billion from the VAT.”
He argued, in a mix of English and Filipino, that “even if you discount the increase in excise tax and other features of TRAIN 1, you could still generate what you need from VAT alone,” and added that, therefore, “[it is good to] pursue [it again].”
He expressed hope that this time around, his peers would appreciate his arguments and support him. “Back then [during voting on TRAIN], I had no supporters. There were only seven of us who voted, that’s why we lost].”
At the same time, Lacson conceded that personal interests prevailed during the deliberations on the controversial tax measure. “Kasi ang mga tatamaan dito, power. Alam natin sino involved sa power. Tapos cooperatives, tapos ang economic zones. Ito ang mga industries na tatamaan. Napansin ko nga na may kasamahan kami sa mayorya lalo na, na nagbabaan kasi madaling araw na amendments noon, napansin ko na talagang nagbabaan sila parang to cover each other’s back.
[We know who would have been hit by this reform, power. We know who are the interests involved in power. Then there are the cooperatives, and the eco zones. These are the industries that would be hit. I recall that some of our colleagues in the majority went back down to the session hall—our voting took place at dawn—and they went down to cover each other’s back].”