MANILA, Philippines - The government is not giving up on its plan to impose the 12% value-added tax on toll as it asked the Supreme court to lift the temporary restraining order barring the Bureau of Internal Revenue (BIR) and the Toll Regulatory Board from implementing the tax measure.
In a 65-page comment to the petition filed by former Nueva Ecija 1st District Representative Renato Diaz and former Trade and Industry assistant secretary Aurora Ma. Timbol seeking to scrap the planned imposition of VAT on toll, the Office of the Solicitor General (OSG) insisted that the petitioners' claim that the toll VAT violates the Constitution is patently "without basis."
"To stop the much needed implementation of a valid tax law is to ignore the legal truism that taxes are the lifeblood of the government. The VAT law and its reforms should not end on paper. The success of the fiscal measure depends to a large degree on its implementation," Solicitor General Jose Anselmo Cadiz said.
"Needless to say, a cold response to VAT on tollways and a 'tunnel-vision' approach in its enforcement are the last things a fiscally-deficient nation needs," Cadiz added.
Cadiz is representing respondents Finance Secretary Cesar Purisima and BIR Commissioner Kim Henares.
The government argued that Section 108 of the National Internal Revenue Code (NIRC) of 1997 imposes a 12% VAT on the "sale or exchange of services" which is defined as the "performance of all kinds of services for others for a fee, remuneration or consideration."
The operation of an expressway for a fee, according to the OSG, is a sale of service which is similar to a use or lease of real property, and is therefore, subject to tax.
The OSG also said that services on expressways are not among those listed as VAT-exempt under Section 109 of the NIRC.
"It is glaring that the operation of expressways is not among those listed as exempt from the Value Added Tax. Yet, exemptions are construed against the taxpayer and liberally in favor of the taxing authority. Taxation is the rule and exemption is the exception," the OSG added.
The OSG branded as "misconception" the claim of petitioners that tollway fees are taxes, thus, the imposition of 12% VAT would mean a "tax upon tax."
Cadiz explained that unlike taxes, which are considered as a demand of sovereignty, toll fees are considered as a demand of ownership.
He added that taxes have no limit and are dependent on the need of the government, while toll fees are fair returns on the cost of property or improvement.
At the same time, Cadiz argued that the VAT on toll will have minimal effect on consumers.
"The cost that consumers would ultimately shoulder as a result of the imposition of 12% VAT on services rendered on expressways is insignificant, given the effect of VAT on the goods and passengers transported using either the Manila North Luzon or South Luzon Expressways."