Republic of the Philippines
HOUSE OF THE REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

4653

House Bill No.

Introduced by
REPS. EMMI A. DE JESUS and ARLENE D. BROSAS (Gabriela Women’s Party)
CARLOS ISAGANI T. ZARATE (Bayan Muna), ANTONIO L. TINIO and FRANCE L.
CASTRO (ACT Teachers Partylist), ARIEL B. CASILAO (Anakpawis Partylist), and
SARAH JANE I. ELAGO (Kabataan Partylist)

EXPLANATORY NOTE

The House of Representatives has been given the exclusive mandate of originating tariff
bills. Both the 1973 (Article VIII, Section 17) and the 1987 (Article VI, Section 28) Philippine
constitution directed Congress to “evolve a progressive system of taxation’.

‘A progressive system of taxation assumes the imposition of a heavier tax burden for those
who have larger incomes. Progressive taxes attempt to reduce the tax incidence of people
with a lower ability to pay, as they shift the incidence increasingly to those with a higher
ability to pay.

However, bowing under pressures from the Intemational Monetary fund, successive post-
Martial Law administrations instituted a regressive system of taxation where the relative tax
rate or burden increases as an individual's ability to pay decreases, thereby imposing
enormous tax burdens on the poorest of the poor.

The Value-Added Tax (VAT), which is an indirect tax, is widely criticized as a regressive
form of taxation. VAT was first imposed under the Philippine taxation system by President
Corazon Aquino in July 1987 when she signed Executive Order 273 into law. The VAT was
further institutionalized when former president Fidel Ramos signed into law RA 8424 or the
Tax Reform Act of 1997.

R.A 8424 expanded the coverage of VAT to include basic necessities such as rice, corn,
fresh, dried and canned fish, fresh pork, beef and poultry meat, fresh eggs, fresh vegetables,
root crops, coffee, sugar, cooking oil, salt, laundry soap, detergents, firewood, charcoal,
candles, and drugs classified as essential by the Department of Health.

This was further exacerbated when the value-added tax was perpetuated and its coverage
expanded by Republic Act 9337, which was signed into law by former President Gloria
Macapagal-Arroyo on 24 May 2005. Worse, under RA 9337, VAT was imposed on such
socially volatile products as gasoline and other petroleum products.

In an attempt to convince the public on the merits of VAT, the Department of Finance
claimed that since VAT is a consumption tax, those who consume more will be taxed more
“In the case of fuel,” the DOF primer reads, “the richest 30% of Filipino families consume


about 65% of the total fuel used in the country while the poorest 30% only account for about
8% of the total consumption.”

IBON Foundation, an independent think tank, clarified that the issue is not who consumes
more but the impact of the price hike on the actual income of the poor, which is the most
important case against the VAT. Even if poor families consume less fuel than the rich, the
effect on them of higher oil prices because of the VAT is greater because of their smaller
incomes compared to those of the rich.

VAT, being an indirect and “passable” tax, comers poor end-users who are not in a position
to further pass on the tax. It is an “end of the line” tax. Everyone else in front or in between
this line has the capacity to be immune. Worse, given the inefficiency of our country's tax
collection and administration, those who can pass on this tax may even stand to profit from
its imposition via the input and output VAT scheme, among others.

VAT is a tax on the poor and the goverment certainly has many other options, The end-
users, especially those steeped in poverty, should not be made to pay for the govemment's
inefficient tax collection. No amount of government explanation can justify the creation or
imposition of taxes that will mostly impact on the poorest of the poor. Even in the face of a
fiscal crisis which admittedly calls for revenue generation, the government has the burden of
proving that all other options are absolutely unavailable before it can even sell the idea of
further taxing the poor.

Taking the foregoing into consideration, VAT cannot be said to be a fair, just, equitable and
progressive form of taxation. Thus, poor end-users have all the reasons to strongly oppose
the imposition of VAT.

Women intensely feel the crunch of the increase in oil prices and the consequent hike in the
prices of basic commodities and services. Three (3) rounds of oil price hike have been noted
since the start of the Duterte Administration (August, September and November 2016). As
family budget shrinks, food on the table becomes scarce, health services become less
accessible and education becomes a luxury. Women need to find ways to augment the
family income or in most instances poor women just have to contend themselves with
sacrificing their own needs just so their families could survive the daily economic hardships.

According to the 2015 Family Income and Expenditure Survey, food expenditures as well as
water, electricity and other gas fuel are the top expenses of the bottom 30% of all income
groups. Meanwhile, wages continue to be depressed for workers eaming minimum wage
income at Php 454- Php 491. The economic think-tank IBON Foundation, Inc. (IBON),
estimates a cost of living of Ph1,096.00 for a family of five living in the National Capital
Region.

IBON asserts that removing the VAT on oil would provide relief to a large number of
consumers and stimulate economic activity. They estimate that without the 12% VAT, oil
pump prices would go down as much as PS per liter. These savings mean more money for
consumers to spend directly on their needs and less production cost for fuel-intensive
businesses.

If needed, there are available alternatives to VAT — altematives that do not promote a
regressive form of taxation but rather a progressive system of taxation that our Constitution
mandates this august body to evolve. There are available revenue measures that do not
further burden the poorest of our constituents,

* nttp://www.nwpc.dole.gov.ph/pages/statistics/stat_current_regional.htm


Oppositors of the RVAT point out that instead of burdening the poor with increases in taxes,
the government could have reviewed the tax exemptions being provided to large
corporations amounting to around P229.1 billion in potential revenues in 2003 alone. A study
of the House of Representatives in 2006 on foregone revenue due to incentives found that
this amounted to P150 billion. These include tax incentives and tax holidays for 3 to 8 years
for 100% foreign-owned corporations registered with Special Economic Zones and the Board
of Investments.

IBON Foundation, further pointed out that tax leakages costs the country about P215 billion
‘to P285 billion in lost revenues.

Meanwhile, corruption in goverment siphons about 20 to 30 percent of the national budget
based on a study by the National Tax Research Center. These alone are enough measures
to counterbalance the unjust imposition of VAT on oil and petroleum products as well as
basic necessities that poor families consume on a daily basis.

Itis in this light that immediate passage of this bill which exempts the imposition of the value-
added tax on basic necessities, prime commodities, oil and petroleum products is eamestly

sought.

AG Dene

EMMI A. DE JESUS
Gabriela Women’s Party
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NE/D. BROSAS ARIEL B. CASILAO.
“abrielaWVomen’s Party Anakpawis Partylist
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Bayan Muna Péftylist Kabfthan partylist
ONiQKTI FRA ‘ASTRO

‘ACT Teachers Partylist AC)Teachprs Partylist


Republic of the Philippines
HOUSE OF THE REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

monn A3

House Bill No’

Introduced by
REPS. EMMI A. DE JESUS and ARLENE D. BROSAS (Gabriela Women’s Party)
CARLOS ISAGANI T. ZARATE (Bayan Muna), ANTONIO L. TINIO and FRANCE L.
CASTRO (ACT Teachers Partylist), ARIEL B. CASILAO (Anakpawis Partylist), and
SARAH JANE |. ELAGO (Kabataan Partylist)

AN ACT EXEMPTING OIL, LPG AND OTHER BASIC NECESSITIES,
FROM THE IMPOSITION OF THE VALUE-ADDED TAX,
AMENDING FOR THE PURPOSE SECTION 109 (1) OF REPUBLIC ACT 8424,
OTHERWISE KNOWN AS THE TAX REFORM ACT OF 1997, AS AMENDED BY
REPUBLIC ACT NO. 9337, AND FOR OTHER PURPOSES

Be it enacted by the Senate and the House of Representatives of the Philippines in
Congress Assembled:

Section 1. Section 109 (1), Chapter 1, Title IV of RA 8424, otherwise known as the Tax
Reform Act of 1997, as amended by RA 9337, 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) xxx
After paragraph A, insert the following paragraphs (B) and (C).

“(B) SALE OR IMPORTATION OF BASIC NECESSITIES CONSUMED ON A
REGULAR BASIS BY POOR FAMILIES, WHICH INCLUDE BREAD; CANNED
FISH AND OTHER MARINE PRODUCTS; NOODLES; BISCUITS; SUGAR;
COOKING OIL; SALT; LAUNDRY SOAP; DETERGENTS; FIREWOOD;
CHARCOAL; CANDLES; AND DRUGS CLASSIFIED AS ESSENTIAL BY THE
DEPARTMENT OF HEALTH;

“(C) THE SALE OF OIL, GASOLINE, LPG, KEROSENE AND OTHER
PETROLEUM PRODUCTS;

And re-letter the succeeding paragraphs as from D to X.

SECTION 2. Implementing Rules and Regulations — The Secretary of Finance shall, upon
the recommendations of the Commissioner of Internal Revenue, promulgate not later than
15 days upon the effectivity of this Act, the necessary Rules and Regulations, all former
rules and regulations pertaining to value-added tax shali be deemed revoked


SECTION 3. Separability Clause — Any provision or portion of this act that may be declared
unconstitutional shall not have the effect of nullifying other parts thereof.

SECTION 4. Repealing Clause — Alll laws, acts, decrees, executive orders, issuances, and
rules and regulations or parts thereof which are contrary to and inconsistent with any
provisions of this Act are hereby repealed, amended or modified accordingly.

SECTION 5. Effectivity Clause — This Act shall take effect fifteen (15) days after its
complete publication in the Official Gazette or in newspaper of general circulation

Approved,