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WHAT YOU NEED TO KNOW ABOUT THE VAT REFORM LAW (RA 9337)
What is Value A!!e! Ta" (VAT)# VAT is a consumption tax imposed on the sale or importation of goods and services in the ordinary course of business. $s this a %e& ta"# No. Most goods and services are already subject to VAT. "#A$%%&' to increase government revenues. Wh' !( &e %ee! RA 9337# The government needs to raise additional revenues to provide basic public services "li(e education) health) etc.' for the gro!ing population and to immediately address the country*s debt that has accumulated through the years. +n ,--.) for every peso earned by the government) /0 centavos go to debt servicing 1 %& centavos go to interest payments and .$ centavos to principal payments. 2or every peso spent by the government) 11 centavos are spent on infrastructure such as roads) bridges) schools) buildings and other public needs. ut !e still need the reforms in the VAT system

What a)e the salie%t *eatu)es (* the RA 9337# The 1-3 VAT rate is retained4 ho!ever) the 5resident shall increase the VAT rate to 1,3 in ,--0 if (a) VAT6collection6to6785 ratio for ,--9 exceeds ,./3) or (+) the National 7overnment deficit6to6785 ratio for ,--9 exceeds 1.93. The *(ll(&i%, ,((!s a%! se)-i.es a)e %(& su+/e.t t( VAT0 5etroleum products and other indigenous fuels 5o!er and electric cooperatives :ervices rendered by doctors :ervices rendered by la!yers 8omestic carriage of passengers by air and sea Non6food agricultural products ;or(s of art) literary !or(s) musical compositions RA 9337 TAKE1 EFFE2T NOVEMBER 34 5667 Wh' sh(ul! the VAT )ate +e i%.)ease! *)(8 369 t( 359# This is part of a bigger effort to address the country*s budget deficit. ;e need to increase our tax collection to sustain the government*s delivery of basic services. ;hile !e can conceptually reduce government expenditures) !e can only reduce it by so much because the public relies on government for these basic services) !hich include education and medical services. +f !e increase the VAT rate from 1-3 to 1,3 in ,--0) !e can raise as much as 5%9.1, billion more. <n the other hand) if this measure is coupled !ith the repeal of the VAT exemptions mentioned above and other provisions of the VAT bill) !e can raise up to 5/1..1 billion assuming a &-3 collection efficiency. #aising these additional revenues is expected to translate to the strengthening of the 5eso68ollar exchange rate and better interest rates arising from improved investor perception of the 5hilippines.

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Wh' RA 9337 is NOT a%ti :((); #A $%%& recogni=es the needs of the poor and exempts basic commodities and socially sensitive products from VAT. A8(%, these VAT e"e8:t .(88(!ities a)e0 Agricultural and marine products in their original state such as vegetables) meat) fish) fruits eggs and rice >ease of residential houses not exceeding 51-)--- monthly ?ducational services rendered by both public and private educational institutions oo(s) ne!spapers and maga=ines4 :ales of persons and establishments earning not more than 51.9 million annually) !hich could include sari6sari stores) carinderias and street vendors. Will :u8: :)i.es (* *uel i%.)ease !ue t( VAT# 5ump prices of fuel !ill increase slightly. ut to cushion the impact of imposing VAT on fuel) #A $%%& put in place a reduction of excise tax on (erosene) diesel and bun(er fuel oil so that !hat !ould other!ise result in a 1-3 increase in pump prices of these products !ould be minimi=ed. Thus) pump prices of petroleum products !ill increase bet!een ,./36/..3 only) instead of a full 1-3. 2or example) >57 costing 5.&-.-- per cylinder !ill increase to 59-9.$& per cylinder 1 instead of 591&.-per cylinder. @erosene costing 5%..-1 per liter !ill increase to 5%0.1, per liter 1 instead of 5%&..1.
Est; <u8: <)i.e= as (* 33>63>67 (i% <es(>Lite)) %9..9 %%.$& %,.%9 %,.$1 ,1.%/ .9/.-Miti,ati(% E".ise -.-"-..9' "1.0%' "-.0-' "-.%-' -.-Ta)i**== "-.9,' "-..0' "-.9&' "-.9&' "-.%9' 1-.-% Ne& <u8: <)i.e %..$% %%.-0 %-.19 %1.&. ,-.&% ..&.$& Fi%al <u8: <)i.e %/.., %0.%& %%.1& %..$1 ,,./.$,.&&

<et)(leu8 <)(!u.t Anleaded #egular 8iesel @erosene un(er >57 "per cylinder'

369 VAT %..$ %.%1 %.-, %.1& ,.-& .../-

<)i.e 9 $%.)ease $%.)ease (i% <es(>Lite)) ,.%& 0.03 1./9.,3 -.,, -.&3 1....,3 -./, %.&3 ,,.&& ../3

*With ROLLBACK of P0.6/Ltr. On all products except for LP ! "ith roll#ac$ of P%.00/$& or P%%.00/c'l. **Based on Octo#er %()0! )00* +OP,/CP-. Pu.p prices .a' /ar' #ased on location! co.pan' and other factors. VAT is a consumption tax. Those !ho consume more !ill be taxed more. +n the case of fuel) for example) the richest %-3 of 2ilipino families consume about 093 of the total fuel used in the country !hile the poorest %-3 only account for about eight percent of the total consumption. This means that a bigger share of the tax burden !ill be borne by those !ho consume more fuel. What is the i8:a.t (* VAT (% :(&e) )ates# The government is doing everything to mitigate the impact of VAT on po!er rates. The franchise tax on po!er distribution utilities !as removed so that the increase in po!er rates is less than 1-3.

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E"isti%, A-e; Esti8ate! A-e; Dist)i+uti(% Res!?l; Rate Res!?l; Rate &ith VAT 9 Utilit' (N( VAT) (<es(>@&h (<es(>@&h) $%.)ease Meralco "NB#' 0.0%00 &.19.& &./3 V?B< "Bebu' 0.,1&% 0.910& ../3 B?5A>B< "Bagayan de <ro' 9.%-.0 9.991$ ..&3 8avao >ight "8avao' ../.-, ..$/0 %.-3

8<? figures as of <ctober ,/) ,--9 ?stimate for Meralco is based on !eighted average rates of residential customers 9- 1 1)--- (!h4 V?B< estimate assumes a &-3 =ero6rated generation for N5B4 8avao >ight estimate assumes a &93 =ero6rated generation for N5B4 B?5A>B< estimate assumes a 0-3 =ero6rated generation for N5B.

+f the 8epartment of ?nergy proposed scheme is approved by ?#B) it is estimated that there !ill be no po!er rate increase for Meralco residential customers) for example) !ho consume not more than ,-- (!h per month "lifeline customers'. 5o!er rates for residential customers !ho consume more than ,-- (!h but not more than $$$ (!h per month shall increase by 5-.&%/(!h. 2or residential customers !ho consume 1)--- (!h or more per month and commercial and industrial customers) po!er rates !ill increase by 5-./9/(!h. What is the i8:a.t (* i8:(si%, VAT (% :et)(leu8 :)(!u.ts t( VAT e"e8:t a,)i.ultu)al *((! :)(!u.ts# +t is estimated that VAT exempt agricultural food products such as rice) corn) fish) vegetables) chic(en and por( !ill increase by not more than 13 due to the imposition of VAT on petroleum products. Will the :)i.es (* ,((!s al)ea!' su+/e.t t( VAT i%.)ease !ue t( the i8:(siti(% (* VAT (% :et)(leu8 :)(!u.ts a%! :(&e)# The imposition of VAT on petroleum products and po!er !ill have minimal impact the prices of goods that are already subject to VAT. To further minimi=e the effect of VAT on sardines) mil() noodles) sugar and coo(ing oil) the VAT system allo!s manufacturers of these products to credit against their output VAT a presumptive input VAT eCuivalent to .3 of the value of their purchases of primary agricultural products used in the production of these goods. H(& &ill the i%.)e8e%tal VAT .(lle.ti(% +e use!# #A $%%& addresses the delivery of basic services by earmar(ing the eCuivalent of ,-3 of the incremental VAT collection for the follo!ing purposesD public elementary and secondary education) health insurance premiums) environmental conservation and agricultural moderni=ation) eCuivalent to the follo!ingD
569 (* i%.)e8e%tal VAT .(lle.ti(%= 03 .3 03 .3 569

5ublic ?lementary and :econdary ?ducation Eealth +nsurance 5remiums ?nvironmental Bonservation Agricultural Moderni=ation TOTAL

F2or illustration purposes only

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1e.t()
5ublic ?lementary and :econdary ?ducation Eealth +nsurance 5remiums ?nvironmental Bonservation Agricultural Moderni=ation

566A <h'si.al U%its=

9,1 single6story bldgs !/ 9 classrooms %.1M indigents to be ne!ly covered $)1$- hectares for reforestation 1)-1, (ms of farm6to6mar(et roads

F2unds !ill be available to the >7A after three years in accordance !ith the >ocal 7overnment Bode An additional 519 million !as earmar(ed to 5ublic +nformation and ?ducation program that !ill explain clearly to businesses the administrative reCuirements under the VAT. Also) starting ,--0) %-3 of the incremental VAT collection for the year !ill be used for capital expenditures. This amount !ill be increased by 93 yearly until it reaches 9-3 in ,-1-.
566A 5ortion of incremental VAT Bollection that !ill go to investments in social services and governement capital expenditures %-3 5667 %93 566B .-3 5669 .93 5636 9-3

What (the) 8easu)es 8iti,ate the i8:a.t (* RA 9337# reduction of excise tax on gasoline) diesel) (erosene and bun(er fuel removal of franchise tax on domestic airlines and common carriers tax on domestic shipping increase in presumptive input VAT of agro6processors from 1.93 to .3 increase the VAT marginal threshold from 599-)--- to 51.9 million per year4 rental threshold from 5/)---/mo to 51-)---/mo4 real property threshold from 51 million to 5,.9 million

Wh( &ill +ea) the hea-ie) +u)!e% (* VAT# :ince VAT is a consumption tax) its burden is heavier on those !ho consume more VATable goods and services. Most of the goods consumed by lo!er income families are VAT exempt. ased on the spending profiles of 2ilipino families across income classes) those families spending not more than 50-)--- annually spend only -.,3 of their expenditures on taxes "VAT) excise and other taxes'. This is largely because of their purchases of VAT6exempt goods "such as foodstuffs consumed at home) !hich constitute more than 0-3 of their purchases'. <n the other extreme) those families spending up!ards of 5,9-)--- annually spend at least ..1-3 of their expenditures on taxes) largely because they consume more VATable goods and services. Will .(%su8e)s +ea) the &h(le +u)!e% (* RA 9337# #A $%%& introduces a burden6sharing scheme among the different sectors of society to address the country*s financial problems. Borporate income tax !as increased to %93 until end of ,--/) then it !ill be reduced to %-3. 7ross receipts tax !as increased from 93 to &3 on royalties) rentals of property) real or personal) profits from exchange) profits from exchange and all other items treated as gross income) of ban(s and non6ban( financial intermediaries +ncome tax exemption of 5A7B<# !as removed What is the ,(-e)%8e%t !(i%, t( a!!)ess .())u:ti(% a%! ta" e-asi(%# O:e)ati(%0 RATE "#un After Tax ?vaders' !as launched to prosecute tax evaders) !hile O:e)ati(%0 RAT1 "#un After the :mugglers' !as launched to prosecute smugglers. R$<1 "#evenue +ntegrity 5rotection :ervice' !as also launched to prosecute corrupt revenue officers and employees.

9/ +t is also important that citi=ens help ensure that the VAT they paid !ill go to the government. <ne !ay of doing this is by as(ing for official receipts every time payment is made for VATable goods and services. 2a%Ct &e /ust i8:)(-e ta" .(lle.ti(% e**i.ie%.' i%stea! (* i8:(si%, %e& ta"es# The 8epartment of 2inance is introducing a more efficient tax collection system. ut this is not an easy tas() including the implementation of the solution to the problem. 2or example) due process reCuirements in our Bonstitution demand a careful investigation) prosecution and removal of corrupt government officials and employees. No!) !e need to immediately address the fiscal problem of the country) especially the country*s debt. ;e expect that the #A $%%& !ill address this most immediate need of the country. Wh( .a% .(%su8e)s a%! ta":a'e)s .all *() Duesti(%s a+(ut :)i.e i%.)eases !ue t( VAT () ,e%e)al Due)ies (% RA 9337# DOE Bonsumer ;elfare and 5romotions <ffice Eotline No. /.-6,,0&. Bomplaints should be directed to retail mar(eting 8ivision) <il +ndustry Management ureau. 2or >57) call /.-6,1%-. 2or >iCuid 2uels) call /.-6900$. DT$ To report any abnormal or drastic increase in prices of goods attributed to VAT) call &916%%%-. B$R 2or Cueries on VAT and other +#6related concerns) call $/16////. Gou may also visit &&&;-at)e*()8;,(-;:h for more information on #A $%%&. DA 2or Cuestions on VAT and agricultural products) call $,-6$1&/) $,-6,,10) %&16,-9-.