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VAT exemption stays in tax reform bill
May, 24th 2017

House Majority Leader Rodolfo Fariñas on Tuesday said the tax exemption of cooperatives would be retained, a looming victory for those who opposed its repeal in House Bill No. 5636 or the Tax Reform Acceleration and Inclusion (TRAIN), the tax reform package of the Duterte administration.

Fariñas told reporters that Speaker Pantaleon Alvarez III “has granted the request of cooperatives” not to remove the value-added tax (VAT) exemption granted by the National Internal Revenue Code to cooperatives. This provision has yet to be discussed at plenary.

The VAT exemption stays “with some amendments acceptable to all concerned,” Fariñas said. The amendments mentioned by the House leader have yet to be released at press time.

The proposed removal of the 12-percent VAT exemption of cooperatives is one of the more contentious issues in the Duterte administration’s tax reform package.
Members of various cooperatives have attended the House plenary for the past two days to urge lawmakers to retain the exemption in the proposed tax reform package.
The 47-strong party-list coalition has also called for the retention of the VAT exemption of cooperatives.
Ifugao Rep. Teddy Baguilat, an opposition lawmaker, said some 150 congressmen had also expressed support for the retention of the VAT exemption of cooperatives.
Coop-Natcco Rep. Anthony Bravo immediately took the floor to interpellate the bill’s sponsor, Quirino Rep. Dakila Cua, on the proposed repeal of the VAT exemption of cooperatives. Cua chairs the House ways and means committee.

Bravo said removing the VAT exemption privilege would result in “stifling the development of cooperatives and denying them the benefits” under the National Internal Revenue Code.

Bravo added that the removal of the VAT exemption would be tantamount to a violation of the Constitution, which provides for the development of social enterprises.

But Cua replied that the “intention” of TRAIN “is also to raise revenue intended to subsidize many programs, including those of cooperatives.”

“We want them to grow and be an integral part of the local economy and therefore there is more than one way to do such. It is not only by tax incentives but more effectively subsidies and programs to empower cooperatives,” Cua said.

The House of Representatives began tackling in plenary session the tax reform package amid criticisms that the bill was full of promises but short on specifics that would ensure its smooth implementation once enacted into law.

“It’s not unknown to us here in Congress that our tax system is complicated and has many loopholes. Let us change it. The ways and means committee studied the bill thoroughly for the development of the Philippines and our countrymen,” Cua said in a brief sponsorship speech.

Nueva Ecija Rep. Estrellita Suansing, in her sponsorship speech, called for the imposition of a P10 tax on sugar-sweetened beverage, which would increase by 4 percent every year.
Suansing urged her colleagues to view this new tax imposition as a “health measure.”

Sugar-sweetened beverages include soft drinks, nonalcoholic flavored, carbonated and noncarbonated beverages, fruit drinks, sports and energy drinks, and sweetened tea and coffee.
Motherhood statements

Albay Rep. Edcel Lagman said there was no question that the government needed the additional revenue for infrastructure projects and socioeconomic programs, but lamented that the tax reform package contained only “motherhood statements.”

“There is nothing specific [that] would give us a definitive insight on what is going to happen,” Lagman said.

He called on the House leadership not to pass the tax reform package “with undue haste,” adding that approving the bill before Congress adjourns on June 2 would deprive congressmen of a “deliberative and exhaustive consideration of a very important tax measure.”

Lagman said he would oppose the bill in “its current form” but would support it if he saw the specific provisions that would clearly define how the tax reform package would be implemented.

For example, he said he would want to see a specific provision on the “linkage between the incremental revenues and the expenditures” earmarked for infrastructure, transportation, health, education and social protection.
The promise of a social benefits card for the vulnerable sector in the bill is not enough as well, Lagman said.

“We could not possibly extrapolate the benefits from these vague conditions. Who are qualified? That is not answered. How much would be given? That is not answered. What is the frequency of the disbursement? That is not there [in the bill],” he said.

Lagman said the bill stated that “not more than” 40 percent of the revenue from excise tax on petroleum products would go to the proposed social benefits card meant to cushion the impact of the resulting higher prices of commodities.

But he said the implementing rules and regulation of the proposed law could actually “go down to the lowest level.”

Lagman said even the additional P10 excise tax on sugar-sweetened beverages appeared to be antipoor because soft drinks were among the few “luxuries” of the underprivileged.

In a separate press conference, Anakpawis Rep. Ariel Casilao said antipoverty measures like the social benefit card were vulnerable to corruption and abuse.

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