Imee Marcos proposes one-year suspension of VAT to ease inflation impact

October 19, 2018

Ilocos Norte Governor Imee Marcos on Friday is proposing a one-year suspension of the Value Added Tax on basic food commodities, fuel and electricity to help Filipinos cope with high inflation.

Marcos, who is running for senator in the 2019 midterm polls, said substitute measures can be done to compensate expected revenue loss from her proposal.

“The temporary lifting of the VAT on basic commodities will provide urgent much-needed relief to Filipinos as inflation hit the hardest in the countryside. The poor Filipinos cannot wait for anti-inflation strategies that could take months to work. They need solutions now,” said Marcos.

"A combination of 10 percent improvement in income tax collection, higher absorptive capacity or much less agency underspending, and three other measures can generate P362 billion in revenues. That would replace the VAT that would be missed," she said.

Bureau of Internal Revenue figures show if income tax collections grow by just 10 percent, the government can earn at least P102 billion in 2018 and P113 billion in 2019.

“I have confidence in the leadership and persuasive powers of Finance Secretary Carlos Dominguez over the BIR and other revenue agencies. I am not asking for the impossible. Having been a governor and congresswoman, I am very aware of what can be done as regards tax administration and collection," Marcos said.

The Department of Finance said rice, fish, meat and vegetables have driven inflation this year, with rice alone rising 10 times to 1 percentage point of the inflation rate.

Data from the Philippine Statistics Agency showed rice was the number one contributor to inflation in September.

“Filipinos cannot wait for global oil prices to go down. Prices are already too high for Filipinos living below the poverty line. Removing the VAT would lighten the burden on millions of Filipino households,” Marcos said.

“The VAT suspension will run parallel to the anti-inflation measures of the Duterte economic team and Bangko Sentral ng Pilipinas. It will buy time for the recovery and expansion of the agricultural sector. Filipinos, most especially the poor, will be clear-cut winners if we can suspend VAT for a year as this will bring down the prices of food, fuel and electricity,” she said.

Marcos said President Rodrigo Duterte cannot amend the Tax Reform for Acceleration and Inclusion, but can suspend its implementation through an executive order. DMS