VAT on Toll Not On Losing Political Capital. It is about obeying the Laws of the Land

Lacierda: Politicizing the Imposition of VAT in tolls

Why is the Aquino government politicizing the explosive issue of imposing Value Added Tax to toll fees? Because under our laws, there is no clear justification for government to impose a tax on a tax.

(I remember one declaration which new Philippine president Benigno Aquino III that under this administration, there will be no new taxes or raise in tax. He says curbing corruption is the best way to increase tax collection and plug the leaks. see this link)

Imposing VAT on a toll is a new tax imposition. This is one promise that Aquino, it seems, is intent to break.

The Aquino administration, through its spokesperson Atty. Edwin Lacierda, defended its position yesterday, saying that it will oppose the recent Supreme Court decision giving a Temporary Restraining Order on the plan of government to tax toll fees.

Lacierda said new President Benigno Noynoy Aquino III is prepared to lose political capital just for this. Lacierda said the Aquino government is determined to impose the 12% Value Added Tax (VAT) on toll rates to generate close to 1 billion pesos worth of revenues, which he said, would be used by government to fund its social programs and cut the budget deficit this year to 325 billion.

Malacanang, says Lacierda, is even prepared to lose more political capital because, in the long run he says, this tax measure will benefit the people.

Let me just tell Mr. Lacierda that this is not about losing someone's political capital, no. This is about the law. This is about respecting the laws of this country.

And the law is very clear---there should be no double taxation in this jurisdiction. Likewise, there shall be no tax levied on public or social services.

Imposing VAT on a public service such as a toll is unconstitutional, illegal, immoral, and patently evil.

This is not the "daang matuwid" that President Aquino promised to give to the people when he ascended to power. This is clearly, a daang baluktot.

Any freshman law student knows what a toll is. The law clearly states that tolls "refers to a tax paid for some liberty or privilege, particularly for the privilege of passing over a bridge or on a highway, or for that of vending goods in a fair, market, etc"

Toll fees are evidently, a form of tax. The Supreme Court even defined it clearly as road user's tax.

What is the definition of a value-added tax? Under the National INternal Revenue Code, value added tax is "an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services. This rules likewise apply to existing contracts of sale or lease of goods, properties or services at the time of the effectivity of this Act. " Sec 1. , Republic Act 7716.

Now, is it patently illegal to impose a tax upon a tax? Of course.

What is the stated state policy of the Philippine government as far as taxation is concerned? Let the Provisions of Republic Act 8424 or the National Internal Revenue Code define what it is:

SECTION 1. Short Title - This Act shall be cited as the "Tax Reform Act of 1997".



SEC. 2. State Policy. – It is hereby declared the policy of the State to promote sustainable economic growth through the rationalization of the Philippine internal revenue tax system, including tax administration; to provide, as much as possible, an equitable relief to a greater number of taxpayers in order to improve levels of disposable income and increase economic activity; and to create a robust environment for business to enable firms to compete better in the regional as well as the global market, at the same time that the State ensures that Government is able to provide for the needs of those under its jurisdiction and care.

Who are covered by VAT? Title IV, VAT, Chapter 1 of RA. 8424, says:

SEC. 105. Persons Liable. - Any person who, in the course of trade or business, sells barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be subject to the value-added tax (VAT) imposed in Sections 106 to 108 of this Code.

The value-added tax is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services. This rule shall likewise apply to existing contracts of sale or lease of goods, properties or services at the time of the effectivity of Republic Act No. 7716.

The phrase "in the course of trade or business" means the regular conduct or pursuit of a commercial or an economic activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a nonstock, nonprofit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government entity.

The rule of regularity, to the contrary notwithstanding, services as defined in this Code rendered in the Philippines by nonresident foreign persons shall be considered as being course of trade or business.

Are services liable to VAT? Yes, they are. But the law is quite specific on this. Let Section 108 of the RA 8424, states it for us:

SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. -


(A) Rate and Base of Tax. - There shall be levied, assessed and collected, a value-added tax equivalent to ten percent (10%) of gross receipts derived from the sale or exchange of services, including the use or lease of properties.

The phrase "sale or exchange of services" means the performance of all kinds or services in the Philippines for others for a fee, remuneration or consideration, including those performed or rendered by construction and service contractors; stock, real estate, commercial, customs and immigration brokers; lessors of property, whether personal or real; warehousing services; lessors or distributors of cinematographic films; persons engaged in milling processing, manufacturing or repacking goods for others; proprietors, operators or keepers of hotels, motels, resthouses, pension houses, inns, resorts; proprietors or operators of restaurants, refreshment parlors, cafes and other eating places, including clubs and caterers; dealers in securities; lending investors; transportation contractors on their transport of goods or cargoes, including persons who transport goods or cargoes for hire another domestic common carriers by land, air and water relative to their transport of goods or cargoes; services of franchise grantees of telephone and telegraph, radio and television broadcasting and all other franchise grantees except those under Section 119 of this Code; services of banks, non-bank financial intermediaries and finance companies; and non-life insurance companies (except their crop insurances), including surety, fidelity, indemnity and bonding companies; and similar services regardless of whether or not the performance thereof calls for the exercise or use of the physical or mental faculties. The phrase 'sale or exchange of services' shall likewise include:

(1) The lease or the use of or the right or privilege to use any copyright, patent, design or model, plan secret formula or process, goodwill, trademark, trade brand or other like property or right;

(2) The lease of the use of, or the right to use of any industrial, commercial or scientific equipment;

(3) The supply of scientific, technical, industrial or commercial knowledge or information;

(4) The supply of any assistance that is ancillary and subsidiary to and is furnished as a means of enabling the application or enjoyment of any such property, or right as is mentioned in subparagraph (2) or any such knowledge or information as is mentioned in subparagraph (3);

(5) The supply of services by a nonresident person or his employee in connection with the use of property or rights belonging to, or the installation or operation of any brand, machinery or other apparatus purchased from such nonresident person.

(6) The supply of technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial or commercial undertaking, venture, project or scheme;

(7) The lease of motion picture films, films, tapes and discs; and

(8) The lease or the use of or the right to use radio, television, satellite transmission and cable television time.

Lease of properties shall be subject to the tax herein imposed irrespective of the place where the contract of lease or licensing agreement was executed if the property is leased or used in the Philippines.

The term "gross receipts" means the total amount of money or its equivalent representing the contract price, compensation, service fee, rental or royalty, including the amount charged for materials supplied with the services and deposits and advanced payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person, excluding value-added tax.

Now, is the use of tollways, a form of service? Yes, it is. But is it covered by the abovementioned provision? Clearly, it is not.

The property that the tollways are, are clearly public properties owned by the Government. Government dispenses a service, which is road construction and maintenance so that vehicles can pass thru tollways.

For this privilege, government has the right to impose a toll, which is a form of tax. Can we now levy VAT to a public service such as a toll way? Obviously, this will mock the very essence of our laws. NO.

Imposing VAT on toll fees would impose a tax on a tax.

Besides, a VAT imposition on toll fees would have a drastic effect on the prices of commodities. I am very sure that manufacturers and good sellers would use this as a pretext to raise prices of basic goods, foodstuffs and other items.

Is this the price we so pay for supporting a popular candidate?

Let the Public, the "bosses" of President Aquino collectively state the Public's Opposition to this new tax measure, that defies logic and clearly an immoral one.

This is one hardship that the People is not prepared to shoulder for Pnoy. Pnoy is clearly being given a wrong legal advice when he decided to support this.

We, the People, will pay our taxes. Yet, let it be reasonable and not illogical.

Let us oppose any illegal tax imposed on an already heavily taxed citizenry.

Besides, many believe that this is just a concession entered into by government with the Malaysian contractor at SLEX. The monies to be collected from VAT will just be used to pay the Malaysian consortium that undertook the rehabilitation of the SLEX.

Nothing wrong, except that let us not use VAT to pay them. The Malaysians entered into a contract with the PNOC. Let the regular budget of the PNOC pay for this.

If the Aquino administration refuses to heed the people and pursues this daang baluktot, let us be a forewarning---the New Patriots will rise again.