SC asked to stop imposition of VAT on toll


Posted at Aug 11 2010 11:05 PM | Updated as of Aug 12 2010 07:26 PM

MANILA, Philippines - A petition has been filed before the Supreme Court seeking to bar the Bureau of Internal Revenue (BIR) and the Toll Regulatory Board (TRB) from imposing the value-added tax (VAT) on the use of tollways starting Monday.

In their petition, former Nueva Ecija 1st Distric Rep. Renato Diaz and former Trade and Industry assistant secretary Aurora Timbol argued that the imposition of VAT on toll fees is unconstitutional and can be considered as an “invasion of legislative powers."

Diaz, the principal author of the Comprehensive Tax Reform Act of 1997 and one of the co-authors and sponsors of the Expanded VAT Law of 2005, noted that toll fees are not included in the coverage of sale of services subject to VAT.

“If the lawmakers did not include toll fees as subject to VAT, the BIR, therefore, should not by implication nor interpretation expand what the legislators enumerated under the law. To include matters which the legislators did not intend to include is considerably dangerous, as it is in effect, invading the legislative field."

Furthermore, the former solon stressed that the court, in the case of Manila International Airport Authority vs. Court of Tax Appeals, City of Para?aque et al, has ruled that toll fees are "user’s tax.”

This only means that the imposition of a VAT on a user’s tax is, in effect, imposing a tax on a tax, and not a tax of on sale of services.

“There can be no VAT if there is no sale of services. In the case at bar, the service being provided to the public is to use a road constructed under a BOT (Build-Operate-Transfer) arrangement. The construction of roads and highways is primarily the role of the State. Thus, to impose VAT on a user’s tax is tantamount to a tax on public services. This is certainly violative of the provisions of the Constitution that taxes must be equitable,” Diaz noted.

Consumer, transport groups to block tax measure

Echoing Diaz's arguments, a consumer group also vowed to file a complaint against the imposition of the VAT on toll, while transport groups are planning to launch protests.

The National Council for Commuters Protection will file for a temporary restraining order against the tax measure before the Supreme Court.

"Roads are public domains, they cannot be taxed. How can the government tax itself? [And] people are already paying for the road user's tax," the group's president, Elvira Medina, told ABS-CBN News.

Transport group PISTON, meanwhile, warned of massive strikes if the implementation of the VAT pushes through.

"Ang magiging pagkilos namin sa August 16, simula palang 'yon. Later on, posibleng magkaron tayo ng mas mabibigat na porma ng pagkilos," PISTON Secretary General George San Mateo said.

Higher toll fees

Tollway operators nationwide are all set to hike fees because of the VAT beginning 10 p.m. on Monday.

Based on the new rates released by the Toll Regulatory Board, fees at North Luzon Expressway will increase to P195 (Valenzuela to Sta. Ines) from P174 for Class 1 (car and jeepneys); P487 from P435 for Class 2 (bus and trucks); and, P585 from P522 for Class 3 (trailers and large trucks).

At the Manila-Cavite Expressway, fees will jump to P25 from P22 for Class 1; P48 from P43 for Class 2; and P78 from P65 for Class 3.

At the Subic Clark-Tarlac Expressway, the rates will go up to P203 from P181 for class 1; P407 from P363 for Class 2; and P609 from P544 for Class 3.

Motorists plying the South Luzon Expressway, meanwhile, will have to pay significantly higher toll fees because the VAT will be implemented alongside a 250% hike in rates. Class 1 vehicles will be charged P85 compared to the original P22, while toll for Class 2 will increase to P170 from P43.

The South Luzon Bus Operators' Association will file a petition for a P0.60 per kilometer fare increase before the Land Transportation Franchising and Regulatory Board.

Because of questions raised over the legality of the VAT on toll, the Senate will hold a public hearing on Thursday to ask the Bureau of Internal Revenue (BIR) to justify the tax measure.

Senate committee on ways and means chairman Ralph Recto, among the authors of the controversial Expanded VAT Law, is also against the imposition of the VAT on tollways.

"This is doublespeak on the part of some of the officials of the government when they say this is not a new tax. It is being imposed for the first time, it is a new tax. Sino ang niloloko natin?" Recto said.

But BIR Commissioner Kim Henares insisted that the imposition of the VAT is legal.

"A general rule in taxation is everything is taxable. Siguro kung talagang ayaw nila ipabuwis 'yan, Senate and Congress should pass a new law to exempt it," she noted.

The BIR is hard-pressed to tax tollway use as the government needs to shore up revenues to cut the budget deficit and fund vital social services. The agency estimates to raise P1 billion daily from the VAT on toll.