History
The Extended Value Added Tax (EVAT) Law or Republic Act. 9337 was enacted to amending Sections 27,28,34,106,107,108,109,110, 111, 112, 113, 114, 116, 117, 119, 121, 148, 151, 236, 237 AND 288 of the National Internal Revenue. It was begun and held in Metro Manila, on Monday July 26, 2004.
This Act which is a consolidation of House Bill No. 3555, House Bill No. 3705 and Senate Bill No. 1950 was finally passed by the House of Representatives and the Senate on May 11, 2005 and May 10, 2005, respectively. But it was imposed a temporary suspension by the Supreme Court a few hours after it went into effect on July 1 because of a petition from opposition lawmakers questioning its legality.
As a response to this allegation, Bunye emphasized that the measure "underwent rigorous and tight scrutiny in the House (of Representatives) and in the Senate"[1]before it was finally enacted and signed by President Gloria Macapagal-Arroyo into law as Republic Act No. 9337 last May 24.
The suspension, however, was considered as a victim of the rift between the administration and the political opposition over the corruption and election fraud charges against President Arroyo.
This delay in the EVAT Law, according to a Business World Research article, worsened the budget deficit; foregone revenues are estimated to be around P5 billion. Aside from the lost revenues, it also resulted in a credit rating downgrade from agencies such as Moody’s, S&P, and Fitch.
Following almost four-hour deliberations, the highest tribunal released the decision around 2 p.m. of October 18, 2005 after months of suspension, allowing President Gloria Macapagal-Arroyo to raise the sales tax rate from 10 percent to 12 percent.venue-increase measure.
The law was enforced on November 1, 2005.
To increase awarness on the law tax campaigns and other events were organized in different parts of the country. Bacolod EVAT awareness roardshow was kicked off in January 13, 2006. Finance Secretary Margarito Teves led top government officials from various government agencies in explaining features of EVAT and its impact on the prices of basic commodities
Rationale
The Expanded value-added tax (E-VAT) law was instituted as a measure to bridle the rising foreign debt of the Philippines and to improve government services such as education, health care, social security, and and transportation. It forms part of the package of measures Malacañang had endorsed to help shore up the government’s fiscal position and reverse the credit rating downgrade certain rating agencies had given the Philippines.
This law was made on account that the more taxed a government can collect, the more services and programs of the government can be implemented as infrastructure projects. The EVAT law granted President Arroyo the stand-by authority to raise the tax from the current 10 percent to 12 percent under certain conditions. This would help in increasing government funds and helps alleviate government deficit so that a inflation rate and unemployment can be overcome. The president stated that the P120 billion expected to be generated a year by the measure represents an unprecedented revenue increase in the country’s fiscal history.
President Gloria Macapagal Arroyo stressed that this law may entail sacrifices in the short term due to the tax increase imposed on sectors of society but its long-term benefits for the country and the Filipino people will be immeasurable and far-reaching in the form of more jobs and livelihood opportunities, better social services, more infrastructures, less debt, and more and better financing for rural programs. This is part of the steps undertaken by the Arroyo government to pave the way to for the plan to build a strong Republic "that will make the Philippines a first world country in 20 years with a permanent environment conducive to sustain wealth creation."
The International Monetary Fund (IMF) stressed the importance of the EVAT law to reduce fiscal deficit of the Philippines. Yet they were at the same time concerned of the delay that was caused by the appeal made to the Supreme Court regarding its implementation. The IMF suggested that other alternative revenue raising measures be held on standby in case there emerges problems with its implementation.[2]
On the other hand, despite the nod of the Supreme Court, some lawmakers after still continued to study a proposal to delay the enforcement of the EVAT on power and oil, which is expected to make life tougher for Filipinos.
The new tax measure was expected to bring the government an extra 2 billion-3 billion pesos (36 million to 54 million US dollars) in monthly revenues in 2004, which can ease the deteriorating budget deficit and national debts dragged by rising oil price and consistent political turbulence.
The government expects at least 80 billion pesos to be resulted from the law the succeeding year, helping reduce the country's budget deficit to 125 billion pesos, or 2.1 percent of the gross domestic product.
[1]28 May 2005 http://www.news.ops.gov.ph/archives2005/may28.htm. Accessed August 19, 2007.
[2].People’s Daily Online. Philippine Supreme Court greenlights EVAT bill. Accessed August 15, 2007
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