This story
was taken from Bulatlat, the Philippines's alternative weekly
newsmagazine (www.bulatlat.com, www.bulatlat.net, www.bulatlat.org).
Vol. V, No. 50, January 29-February 4, 2006
VAT Rate Hike
Benefits Creditors, Not the Public
Contrary to government claims
that revenues from the EVAT would go back to the people in the form of enhanced
services, IBON executive director Rosario Bella Guzman said that the underlying
purpose of the EVAT implementation is to maintain the country’s creditworthiness
by appeasing international credit rating agencies and commercial banks, and to
be able to continue servicing the country’s debt.
By IBON Foundation Contrary to government
claims, the additional two percent increase of the Value-Added Tax (VAT) rate is
for the benefit of the country’s creditors and not the Filipino people,
according to independent think-tank IBON Foundation. Government economic
managers implemented the expanded value-added tax (EVAT) in the context of the
country’s growing budget deficit, or its inability to raise sufficient revenues
to meet growing expenses. To recall, the EVAT was the most significant of
President Gloria Arroyo’s package of revenue measures that she asked legislators
to pass into law in the wake of her declaration of a “fiscal crisis”. The EVAT law will be
implemented in two phases: in November 2005 it removed VAT exemptions on many
products and services, most notably the petroleum and electricity sectors; then,
starting in February, the VAT rate will be raised to 12 percent from the present
10 percent. The EVAT is estimated to raise P97-P105 billion in additional
revenues in 2006. Government has claimed that
revenues from the EVAT would go back to the people through enhanced health
services, quality education, adequate food, agri-infrastructure and low-cost
housing. But says IBON executive
director Rosario Bella Guzman, the underlying purpose of the EVAT implementation
is to maintain the country’s creditworthiness by appeasing international credit
rating agencies and commercial banks, and to be able to continue servicing the
country’s debt. Moody’s and other
international credit ratings firms are scheduled to assess the country’s credit
rates and release their conclusions within the first quarter of the year. Their
ratings will determine the cost of the country’s borrowing in international
financial markets, adds Guzman. It also should be noted
that nearly 85 percent of the country’s 2005 revenues go to servicing public
debt, which means government had to keep on borrowing in order to meet its
current expenses. Although the cost of servicing the debt has been ameliorated
somewhat by the strengthening of the peso against the dollar, debt payments
still remain substantial. Some P720 billion has been allocated for total debt
servicing of the principal and interest of the public debt, or around 68 percent
of the proposed 2006 budget. Meanwhile, spending on
social services has been falling. Government spending on education in the 2005
budget has fallen five percent since 2001, and that for health by almost 18
percent.
Thus Guzman says, the increased revenue from the EVAT ultimately means drastic
cuts in the budget for services and people’s welfare. This does not include yet
the impact of the increased VAT rate on the prices of oil and basic goods and
services. Posted by Bulatlat © 2006 Bulatlat
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Posted by Bulatlat