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Full implementation of VAT on

Iloilo City (31 January 2006) -- The Department of Finance has said that the conditions needed to for the government to increase the VAT rate can be met. It is optimistic it will be able to meet the required deficit-to-GDP (gross domestic product) ratio for implementing the increase in the value-added tax (VAT) to twelve percent up from ten percent starting February 1.

According to Secretary of Finance Margarito TeVes, only one of two conditions need to be met for the government to increase the VAT rate and it anticipates that the ratio required would exceed the minimum allowed under the law.

Under the New VAT Law, the President is allowed to increase the sales tax rate if the deficit exceeds 1.5 percent of GDP and when VAT collections exceed 2.8 percent of the total economic output.

Per figures released by NEDA, the Gross Domestic Product (GDP) rose by 5.1 percent in 2005, reaching the high-end of the NEDA forecast of 4.87 to 5.1 percent growth. Government was able to contain its full year fiscal deficit to P 146.5 billion better than the expected target of P 189 billion. In 2006, the deficit is expected to fall to 124.9 billion or 2.21 percent of GDP.
The full implementation of the VAT is expected to generate for government some P77 billion to P82 billion in 2006, which are intended primarily for social services and infrastructure projects according to Secretary Teves. (PIA 6)

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