Finance Secretary Margarito Teves yesterday said that the government's goal of hitting a balanced budget by 2008 is the driving force behind the implementation of the Expanded Value Added Tax, which will be raised from 10 percent to 12 percent beginning February 1.

Many features of the VAT are still complicated but beyond that, what's important is for us to work together to achieve an objective - a balanced budget by 2008, Teves told an audience of more than 1,000 at the Expanded VAT Domestic Roadshow organized by the Bureau of Internal Revenue Region 12 at the Bacolod Convention Plaza Hotel yesterday.

Teves said in his keynote address that "the name of the game is, try to reduce the (budget) deficit."

We need to collect as quickly as we can, we need the money right away, he said, explaining why the government has resorted to EVAT instead of other revenue-raising measures.

Last year's estimated budget deficit, he said, was P160 billion and the government is aiming to reduce it by P125 billion or P100 billion in 2006.

This is for the country to grow a little faster and to attain fiscal discipline, he said, adding that the government needs to balance expenditures with revenues so it will not borrow much.

Teves said that the Bureau of Internal Revenue is expected to generate P35 billion in additional annual revenues with the two percent increase in the VAT rate.

He said that in the first two months of the EVAT implementation, from November to December, the BIR has not yet attained its average gross target of P4 billion.

Finance Undersecretary Gil Beltran said in his presentation that at 12 percent VAT rate, the BIR is projected to generate P81.4 billion in revenues this year.

Projected VAT revenues for 2007 is P72.5 billion; 2008, P83.3 billion; 2009, P82.8 billion; and P2010, P96.1 billion. Beltran said that based on these projections, the national government's fiscal balance will be "accelerated to 2008 as revenue collection improves and on account of the VAT and other collection efficiency enhancing measures" and "debt will be reduced to 51 percent of Gross Domestic Product in 2010."

Teves admitted that while EVAT revenues will be initially used to help offset deficit and pay debts, he said that over time, the utilization for debt and deficit will be reduced and the portion for social services will be increased. For 2006, to be utilized for debt and deficit reduction is 70 percent while for capital outlay, 30 percent; 2007, 65-35; 2008, 60-40; 2009, 55-45; and 2010, 50-50.

Teves said that the government is committed to the transparency in reporting the use of EVAT funds.

In increasing the VAT rate, Teves said, government agencies have put in place mitigating measures to ease the impact on domestic prices.

These include exemption of wage earners from withholding tax; exemption from VAT of basic commodities such as vegetables, meat, fish, eggs, and low-cost housing and education expenses; removal of excise taxes on diesel and fuel oil; productivity, logistical and retail linkage enhancements by the Department of Agriculture to reduce cost of wage goods.

At the EVAT Domestic Roadshow yesterday, Teves and Beltran were joined by officials from the BIR, Departments of Trade and Industry, Energy and Agriculture and Bangko Sentral ng Pilipinas Investor Relations Office.

It was attended by city and municipal mayors, financial executives, representatives from the business sector, local government units and the academe.*NLG

back to top