RP to up ASEAN imports tariffs if sales tax impasse remains

RP to up ASEAN imports tariffs if sales tax impasse remains

Agence France-Presse, Manila

Philippine tariffs on imports from ASEAN countries will rise
by a percentage point to compensate for a key sales tax if a
legal impasse over its introduction is not resolved, officials
said on Thursday.

"If the temporary restraining order is maintained the finance
department will lift the tariffs by one percent," Dennis Arroyo,
director of the economic planning department's policy planning
office, told a news conference.

The Supreme Court suspended the collection of the expanded
value-added tax on the day that it came into effect on July 1,
denying the government much needed extra revenues.

The sales tax is also the centerpiece of President Gloria
Arroyo's efforts to raise annual state revenues by 80 billion
pesos (US$1.43 billion) and avoid a looming fiscal crisis.

If implemented, average tariffs on ASEAN imports would rise to
six percent, which does not violate any ASEAN trade agreement,
Economic Planning Secretary Augusto Santos told the same news
conference.

"The increase is not pertaining to our obligations under WTO,"
Santos said, referring to the World Trade Organization (WTO). "It
only pertains to obligations that we have with ASEAN."

The Association of South East Asian Nations (ASEAN) groups
Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the
Philippines, Singapore, Thailand and Vietnam into a 10-nation
trading bloc.

The government says it had anticipated raising about half a
billion dollars for the last five months of 2005 through the
sales tax before the courts acted.

Santos said financing the government's anti-poverty mid-term
development program ranks as the government's "greatest
challenge".

"The challenge really is to be able to raise additional
revenues to finance the development plan," he said, citing the
burden of a population growing at a rapid annual rate of 2.36
percent.

Due to limited state revenues, the Philippines only spends an
amount equivalent to four percent of its gross domestic product
on infrastructure, compared to between eight and nine percent for
some of its ASEAN neighbors.

"We are really in a losing position," he added.

The impasse over the sales tax law has triggered credit rating
agencies Standard and Poor's, Moody's Investors Service and Fitch
Ratings to downgrade their outlook on the Philippines to negative
from stable.