Monday, June 25, 2007

The highwaymen are here again!

The politicians don’t just want your money. They want your soul. They want you to be worn down by taxes until you are dependent and helpless. When you subsidize poverty and failure, you get more of both.

–James Dale Davidson, National Taxpayers Union (An American antitax advocacy group)

WHEN President Arroyo said last week that there wouldn’t be new taxes, we were apprehensive because politicians always end up implementing the opposite.

“Read my lips: no new taxes,” said candidate George W.H. Bush during the 1988 Republican National Convention. He ended up eating crow and Americans having to pay more taxes when he took power.

Indeed, finance officials declared a few days ago that they were looking for ways to enforce the 12-percent VAT on toll ways. We use the term “enforce” because the expanded-VAT law author says this particular service has always been “VAT-able.”

Here’s the rub: toll-way operators currently don’t pay VAT since, they say, the old law doesn’t specifically tell them to do so. So counterintuitively, Malacañang spin masters thought that if the law doesn’t say so, it could also mean the government is not prevented by the law from collecting VAT from the toll ways.

It’s a kind of creative and funny logic. We’d like to laugh but we can’t because of its possible negative implications. The government hopes to collect at least a billion pesos but it’s not certain how much it would cost ordinary Filipinos. It’s certain that toll operators would pass the extra cost to consumers by raising fares.

Economically, that would mean higher transport costs to vehicle owners and operators, which could cascade in terms of higher bus and FX fares for commuters; higher prices of fruits, vegetables, fish, meat and cereals as viajeros are likely to pass on the cost to consumers; higher cost of business to entrepreneurs big and small on top of the already high transactions cost (read: expensive electricity, high port users’ charges and high cost of long-distance calls) that they currently bear; and which could ultimately spell economic difficulties to wage earners.

Of course, finance officials—and even the VAT author, Sen. Ralph Recto—are saying that the toll operators should not pass on the tax to consumers because from the start, they’ve been expected to charge VAT-inclusive fees.

Yet, on the other hand, the operators, for instance, the Philippine National Construction Corp. (PNCC) through its spokesman, say they haven’t done so. And if the State were to insist on enforcing it now, they’d have to jack up the fees to include the VAT, and thus have to seek permission from the Toll Regulatory Board.

Don’t get us wrong. We want the State to have more money to finance growth. And we’ve always stood for collecting the right taxes, because in a country of scarce resources, everyone should pull in weight. But we feel that the revenue generated should be fair and just, and this one is certainly not because of its potential impact on the poor.

What adds salt to injury is the fact that government taxmen don’t really have to hit the toll ways had the ruling party been diligent in working on the country’s fiscal-reform program.
For instance, the fiscal-rationalization bill has been languishing in Congress. That tax proposal would have added more or less P5 billion to the country’s coffers without hurting the poor. And yet, Malacañang has not lifted a finger to nudge its allies to ensure the bill’s passage.

The continuing failure of the government to reform the incentive system could mean that the country would continue to suffer a hemorrhage of at least P300 billion a year in terms of forgone revenues.

And now, the government simply wants the easy way out by shaking the toll ways. It is this kind of mentality that is destroying the country.

In hindsight, the real issue here is probably not all about taxes but governance—or the lack of it. If we take it from, Sen. Ralph Recto, tolls are “VAT-able” and have always been covered by the original VAT law. What motorists are paying right now is already VAT-inclusive—supposedly.
That means we have always been paying VAT at the toll and there’s no need to raise toll rates.

If his presumption is right, the question now is “where’s the money?” Does it mean the toll operators like PNCC were collecting VAT money and pretending it’s their money?

Yet the way the PNCC spokesman responded to questions from DWIZ’s Karambola hosts on Monday, it’s obvious they never folded in the VAT into pass charges, so there’s nothing to spit out.Now, we have a very complicated situation here and the government, especially Finance Secretary Gary Teves, should clarify this matter first, and urgently, before even contemplating about shaking out the people at the tolls.

(Note: Originally prepared as editorial for BusinessMirror, 26 June 2007)

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