Angara should resign due to conflict of interest... | SWP & FDC Press Statement Nov 27 2017
SocialWatch Phils·Monday, November 27, 2017
Public service means upholding public interest at all times. It is never about promoting self or private interests. It is in this context that we in Social Watch Philippines and the Freedom from Debt Coalition are alarmed by Sen. Sonny Angara’s move to which solidify the zero-rating of value added tax (VAT) being enjoyed by indirect exporters or suppliers in special economic zones as this abets tax avoidance, if not tax evasion. With its express inclusion in the tax reform measure, it could pre-empt subsequent moves by Congress to rationalize fiscal incentives. Furthermore, Sen. Angara and his family’s links to the Aurora Pacific Economic Zone and Free Port Authority or APECO is publicly acknowledged. In this context, there constitutes a conflict of interest with Sen. Angara’s participation on this issue. We respectfully call on him to resign his position as chair of the Senate Committee on Ways and Means. What does VAT zero-rated mean? Zero-rating not just exempts the enterprise from paying VAT from his sale of goods and services. It entitles the enterprise to an input VAT credit, a refund, so to speak, for all the VAT the enterprise it paid for all the VAT-able inputs it used in its operations. In effect, government actually subsidizes the operations of the enterprise. In the ideal VAT system, enterprises who are purely exporting their goods should be entitled to the zero-rating privilege because they end up paying the VAT in the country to which their good is being shipped. However, in our not-so-ideal VAT set up, enterprises that are merely part exporter and actually sell part of their goods domestically are able to bleed our government coffers by just being ecozone locators. While data on the volume of actual exports coming from PEZA enterprises is currently unavailable, it is safe to assume that at least 20% of sales from PEZA enterprises mainly serve the domestic market. Of the Php 1.03 trillion worth of zero-rated transactions in PEZA in 2015, a portion of exporters identified to be indirect exporters may be unfairly benefitting. Using this assumption, already at Php 25 billion could be recovered as VAT from indirect supporters in PEZA. Based on the list of PEZA-registered enterprises as of August 2017, 1,920 of the 3,374 operating registered enterprises are not categorized as an export enterprise. It means that 57% of PEZA enterprises have operations not mainly for export. Furthermore, at least 15% of PEZA enterprises fall under the “Transport Storage sub-industry”, which is basically a sector that deals with non-tradeables, unlike usually exported products such as apparel and other manufactured final goods
From the table above, the losses from them ranges from Php 12 billion to Php 62 billion, depending on the share of total indirect exporters in PEZA. The mid-range assumption based on other information may point that the losses are likely to be at least Php 24B. In addition, non-“export” sales in PEZA is estimated at around PhP 940 billion worth of transactions. The law provides that all enterprises within PEZA are already VAT-exempt, but the losses under the Angara bill would mean that the government has to even refund them of their input tax. Given that costs range from 40% to 60% of total revenues, new losses range from PhP 45 billion to Php 65 billion in PEZA alone.
Need to plug leakages of tax avoidance and evasion It is publicly acknowledged that economic free zone is close to the heart of the Angaras. The older Sen. Edgardo Angara authored the Aurora Pacific Economic Zone and Freeport Authority in 2013. The current senator filed the counterpart bill in the House of Representatives. We believe that Sen. Angara should rescind SB 1592 as is retains the leakages from the zero-rated VAT granted to indirect exporters and mitigates against the fiscal reforms we seek in the current tax system. Technically, tax breaks or incentives that the government gives to various sectors are considered “tax expenditure.” These are forgone revenues which we could have spent to support the programs for the poor. (END)
Press Release 8 Nov 17SWP to Senate: "Keep 2018 Budget pork-free"
"What's in it or us?" Social Watch to hold forum on universal protection floor today
Anti-pork groups found 2017 Budget still far from "real change"
President Duterte to put Yolanda on top of his agenda
Budget watch group urge President Duterte to put Yolanda on top of his agenda
Social Watch Philippines questions 'pork barrel' in 2017 budget
Social Watch seeks adequate funding in NEP to address poverty, unfinished