Republic of the Philippines
HOUSE OF REPRESENTATIVES

Quezon City

FIFFEENTH CONGRESS

Second Regular Session

House Bilt No, 49°71

INTRODUCED BY REPRESENTATIVE ARTHUR C. YAP

EXPLANATORY NOTE

In very recent years, most especially during the previous administration, much
emphasis was placed on the construction, development (and re-development) of
expressways, highways or toll ways.

‘Thus, we have soen the North Luzon Expressway, being redeveloped and
becoming a world class superhighway, making travel up north very fast and comfortable.
Almost simultaneous is the upgrading of the South Luzon Expressway, parallel with the
elevated Skyway, which was also extended up to Alabang, Muntinlupa, thus trips to
Southern Luzon are now a first class cruise.

Likewise, we have seen the inauguration of the Subic Clark Tarlac Expressway,
connecting (wo very important transport and industrial hubs, the Diosdade Macapagal
International Airport and the rest of the Clark Ecozone, to the Subic Bay Freeport. The
said highway likewise extended the NLEX further up to northern portions of the Tarlac
Province. In the South, the SLEX has been extended by the Southem Tagalog Arterial
Road, thus making travel to Batangas City and the international port therein, also a
breeze. Last would be the Manila-Cavite Expressway which has now been extended also
up to Cavite City.

Soon, other toll ways, conceptuilized and initiated during the previous
administration would be unveiled and operated. This would include a highway
connecting the progressive southern provinces of Cavite and Laguna, and another in the
north that would commence from Tarlac to Pangasinan and all the way to La Union.

For those living in suburban Metro Manila and nearby provinces, the use of
expressways has become, not just a hucury, but a necessity. They now go to work, school
and other daily and routine place of destinations with ease and speed using the toll ways.

For those from the provinees, these expressways have been catalysts of their local
industries’ growth and development. Investments are now flourishing in the countryside
connected by these highways, generating income for the government, and more
important, creating jobs by the millions. The goods from the provinces, especially the
perishable ones like agricultural produce, are brought cheaper and faster to the center of


trade and commerce, which is Metro Manila. Also, international and domestic tourism
thrives as travel destinations can easily be reached.

However, since government coffers are very inadequate, if not scarce, most of
these projects are undertaken using the Build Operate and Transfer or similar schemes.
Private funding and undertaking is utilized, similar to the Public Private Partnership
being advocated by the present administration.

In such cases, even though these expressways are basic government
infrastructures, they cannot be used for free. Motorists and the commuting public pay toll
fees for their use.

Yet, there are many people who complain about the expensive toll fees for the use
of the above mentioned expressways. And indeed this assertion is not without basis. The
toll fees of around P3 per kilometer for small or class 1 vehicles, P6 for medium sized
vehicles and P9 for large trucks, are quite costly

And now, there is the impending imposition of the Expanded Value Added Tax
{EVAT) on toll fees.

On July 13, 2010, the incumbent Commissioner of the Bureau of Internal
Revenue issued Revenue Memorandum Circular 63-2010. This Circular imposed the
payment of EVAT on toll fees. The Commissioner justified this imposition by stating that
that Section 108 of the National Intemal Revenue Code (NIRC) allows the imposition of
EVAT on all services for a fee.

‘A petition was filed with the Supreme Court against the said Memorandum
Circular. Unfortunately, the highest court of the land recently denied the petition and
upheld the imposition of EVAT on toll fees.

‘The decision noted the absence of legislation against VAT on toll and said that
every activity that can be imagined as a form of service rendered for a foe should be
deemed included or “V4 Tahle” unless some provision of law especially excludes it.

This proposed legislation would now be the legislation against EVAT on toll.

In the most recent State of the Nation Address, the President mentioned that his
administration would not pursue the passage of new tax laws.

However, contrary to such pronouncement, the BIR is still contemplating on
pursuing the imposition of the EVAT on toll.

Of course, technically, it is true that the EVAT on toll is not a new tax imposition.
This is because the SC decision stated that it can be imposed without the passage of a
new tax measure. Nevertheless, its implementation now would be, for all intents and
purposes, amount t a new tax imposition on the public. This is since said tax has not
been previously imposed.

And unfortunatety, the reality is that the motorists and the commuting public can
no longer afford an increase in the price of toll fees. This is especially in these trying
times when prices of basic goods and services are skyrocketing. There is no abatement in
the increase in the prices of food und groceries, petroleum or gasoline, and utilities such
as electricity and water.

Furthermore, an increase in the price of the toll fees, brought about by the
imposition of EVAT, would bring a rippling effect of increasing transport fares and
prices of other basic commodities and services. And, coupled by the inelasticity of wages,



the ordinary consumer and the general public would not just be overwhelmed, but may
simply break down.

It is conceded that the goverment is in dire need of additional revenue to finance
its operations. Maybe, the option for the government is the much bandied about plugging
of loopholes in the tax collection system. It carmot be in the form of new impositions to
the general public, whether it would be in a new tax law or in an administrative circular
interpreting an existing tax law.

The Highest Court noted that the executive exercises exclusive discretion in
matters pertaining to the implementation and execution of tax laws. Consequently, the
executive is more properly suited to deal with the immediate and practical consequences
of the EVAT imposition.

This representation cannot risk a decision of the executive to impose this EVAT
on toll ways and is even of the strong opinion that Congress should preemptively act
against it. It is in this view that the immediate passage of the bill is tly sought.

ARTHUR C. YAP
Representative


Republic of the Phitippines
HOUSE OF REPRESENTATIVES
Quezon City
FIFTEENTH CONGRESS

First Regular Session

House Bil No._A97 4.

INTRODUCED BY REPRESENTATIVE ARTHUR C. YAP

AN ACT

PROMOTING THE WELFARE OF MOTORISTS AND THE
COMMUTING PUBLIC, ADVANCING COUNTRYSIDE
DEVELOPMENT BY EXEMPTING FROM PAYMENT OF THE
EXPANDED VALUE ADDED TAX THE USE OF TOLL WAYS,
AMENDING FOR THE PURPOSE SECTION 109 OF THE
NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND
FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled.

SECTION 1. Short Title. — This Act shall be known as the “EVAT Exemption on
Toll Ways Act of 2011”.

SECTION 2. Declaration of Policy. — 11 is hereby declared the policy of the State
to promote the welfare and alleviate the burden of motorists and the commuting public
and to advance the development of the countryside by making the use of basic public
infrastructure, including toll ways, inexpensive. The use of toll ways shall hereinafter be
exempted from payment of the expanded value added tax (EVAT), other taxes and duties.

SECTION 3. Amendment of Section 189 of the National Internal Revenue
Code. ~ Section 109 of the National Internal Revenue Code or Presidential Decree No.
1158, as, as amended by among others, Republic Act No. 8424 or the Tax Reform Act of
1997, and Republic Act No. 9337 or the Value Added Tax Reform Act , is hereby further

amended, to read as follows:


“SEC. 109. Exempt Transactions, — (1) Subject to the
provisions of Subsection (2) hereof, the following transactions shall be
exempt from the value-added tax:

(A) xx

(W) Fees and other charges collected from the use of toll ways or
similar expressways that are constructed, maintained and operated by
private tollway operators at their own expense under the Build Operate
and Transfer and other similar schemes.

XXX”

SECTION 4. Separabitity Clause. - 1f any provision of this Act, or any parts
thereof, is declared unconstitutional, the same shall not affect the validity and effectivity
of the other portions.

SECTION 5. Repeating Clause. - All laws, executive orders, presidential
decrees, proclamations, rules, regulations, issuances and enactments of parts thereof
inconsistent with this Act are heteby repealed or modified accordingly.

SECTION 6. Effectivity. - This Act shall take effect fifteen (15) days from its
complete publication in the Official Gazette of in a newspaper of general circulation in

the Philippines, whichever comes earlier.

APPROVED.