Philippine Congress completes vital tax law

Philippine Congress completes vital tax law

MANILA (Reuter): The Philippine Congress said yesterday it is applying the final touches to an expanded value added tax (VAT) law to help the government clinch a long-sought deal with the International Monetary Fund (IMF).

Senator Ernesto Herrera, co-chairman of the congressional panel drawing up the legislation, said in a statement the VAT law would shore up revenues and raise up to 8.3 billion pesos (US$308 million) for the cash-strapped government.

"We have concluded debates on the substantive issue and only matters of language and style stand in the way of approval of the law on Monday," he said.

The law would replace a complicated system of sales taxes in the Philippines with a uniform 10 percent tax.

The expanded VAT will cover the sale or lease of patents, copyrights and secret formulae, sales by hotels and caterers, dealers in security papers and lending investors, the sale of non-life insurance, radio-television franchises, and operators of road freight like taxi cabs and tourist buses.

Two-year deferments were granted to professionals, actors, athletes, banks and financing firms, and ocean-going transport vessels, Herrera said. Those excluded from the law were sales of utilities, life insurance and common transport carriers.

Critical

Passage of the law is critical in the Philippines' attempt to close a deal on a three-year economic program with the Fund worth $650 million in fresh funds for Manila.

The IMF has made approval of new laws -- an expanded VAT law, a law to double the stock transaction tax to 0.5 percent, and a law to remove curbs on the entry of foreign banks into the country -- essential before a deal could be signed.

Philippine finance secretary Roberto de Ocampo and Central Bank governor Gabriel Singson said on Thursday approval of the three laws would lead to a deal with the IMF when they meet with Fund officials in Washington next week.

A deal with the IMF would allow the economy to grow by 4.5 percent in terms of gross national product in 1994, officials said. The Philippines expects GNP to expand by eight percent before the end of the decade if an IMF agreement is reached.

An agreement with the Fund would also allow the government to hold talks with aid donors led by the United States and Japan in a pledging session for fresh aid to the country in June or July.