Gatchalian Criticized Department of Finance' Proposal To Increase VAT

As part of the government’s plan to reform the tax system, Senator-elect Sherwin Gatchalian has criticized the proposal of the Department of Finance (DOF) to increase the value-added tax (VAT) rate while reducing income tax rates.

The proposal of DOF according to him is “anti-poor”.

In a PNA report, Senator Gatchalian quoted...

The reduction in the income tax rates will not be felt by the poor because their incomes are already exempted from taxation. The poor, however, will be adversely affected by any increase in the VAT rate.

DOF proposed to increase the VAT from 12% to 14% and expand the VAT base by removing all exemptions; except in agriculture, banks, education, health and remove zero-rating except direct exports.

The DOF submitted to Congress last month the government’s tax reform bill. This includes tax exemption to all wage earners with an annual income of less than P1 million.

A study cited by Gatchalian which was conducted by former Secretary General Romulo Virola of the National Statistical Coordination Board, revealed that over 74.7 percent of the population or 14 million families comprise the lower class, while only 0.1 percent or 21,200 families constitute the upper class.

The remaining 25.2 percent fall within the “middle class,” or the 4.7 million families with five members who earn P328,000 to P4 million a year.

Senator Gatchalian explained...

Given the inelasticity of basic goods and services covered under the VAT, the burden of the increased VAT rate will be shifted from the producers to the consumers. The poor will be forced to allocate a greater proportion of their already meager incomes on utilities, fuel, and other basic consumption goods and services.

For the knowledge of all, Philippines has the highest VAT rates at 12% in Southeast Asia. Senator-elect Gatchalian also added that...

Increasing the VAT rate will definitely have a negative effect on the purchasing power of the poor, who are always the first to bear the brunt of price hikes of basic commodities and utilities.

READ ALSO: Death Penalty For PLUNDER Wants Senator Panfilo Lacson^[1]

If you agree with Senator Gatchalian's remarks, kindly share this article. Thank you!

Source: Politiko^[2]
Photo credit: wingatchalianforsenator^[3]

References

1. ^{^} Death Penalty For PLUNDER Wants Senator Panfilo Lacson (www.allthingspinoy.com)
2. ^{^} Politiko (politics.com.ph)
3. ^{^} wingatchalianforsenator (www.google.com.ph)