Lawmakers be warned: Backlash from VAT will be severe!

May 12, 2005
The passage of the bill amending the VAT rate system is almost a done deal. But this does not preclude the idea of further challenging the legitimacy of this onerous tax to be imposed on workers and the toiling masses in general.

We are specifically aghast at the bicameral conference committee report's provision assigning the authority to the Executive to raise the VAT rate from the maintained 10% to 12%. Not only does this blur the line between separation of powers, this is a false safety net designed to assuage fears over the fact that the VAT rate will indeed go up to 12% and cover more products and services.

The proposed bicameral version proposes that this rate increase will only be implemented by January 1, 2006 if two conditions are met, that is, if VAT collection as a percentage of GDP exceeds 2.5%, and if VAT collection as a percentage of the national government debt exceeds 1.5%.

The truth, however, is that as of 2003, VAT collection as a percentage of GDP has already reached almost 2%, and growing by an average of 0.2% every year. Meanwhile VAT collection as a percentage of the government debt has already reached 3.84% as of 2004. This provision therefore is intentionally misleading and purely procedural since it is a certainty that these requirements will be met.

The 'no-pass-on' provision was also deleted at the bicameral level, thus unmasking lawmakers' insensitivity to the need to provide at least some semblance of safety measure against the VAT rate finding their way to consumers' electricity bills. And even then, one cannot be assured that workers and the public in general won't end up paying for the VAT increase, since the VAT system has always been beleaguered with implementation problems.

The current version left out the exemption on imported coal which remains the primary source of power generation, and it has lifted the exemption on power transmission and distribution, so our lawmakers expect workers to just sit idly by and welcome this draconian measure with open arms, when in fact this will send electricity prices through the roof.

What this all means is that the legislature has not only failed to heed the widespread calls for the rejection of the VAT as a measure to address the looming fiscal crisis. It has also abandoned any pretension of protecting workers' interests with the mangled and horribly disfigured version of the VAT bill now up for approval.

But our lawmakers pass this measure at their own risk. There will be a backlash to this travesty of people's rights. The bottom line is, when people receive the billing statement for this idiotic measure, the protests and massive discontent already evidenced by the street protests against this measure will surely more than double. And those who are about to sell the interests of workers ad the general public will pay for this sell-out through the streets and through the ballot.