After rate increase, Supreme Court to rule on VAT on toll

ABS-CBN News

Posted at Oct 22 2010 11:05 PM | Updated as of Oct 23 2010 07:39 AM

MANILA, Philippines - After lifting the temporary restraining order (TRO) on the toll rate increases, the Supreme Court has yet to do the same on the proposed value-added-tax (VAT) on toll fees.

The Supreme Court previously issued on the same day, August 13, 2010, separate TROs to stop both the rate hike and VAT on toll. Supreme Court spokesperson Midas Marquez said the unanimous decision by the en banc released last Thursday "has nothing to do with the VAT."

If the TRO on VAT will be lifted, the following tollways will be affected:
  Operator Length
North Luzon Expressway (NLEx) Manila North Tollways Corp.  84km
South Luzon Expressway (SLEx) Citra Metro Manila Tollways Corp.   75.8km
Manila-Cavite Expressway  (Coastal Road) United Engineers Malaysia-Mara Philippines and the PEA Tollway Corp. 6.6 km
South Metro Manila Skyway (Skyway) Skyway Operations and Maintenance Corporation (SOMCo), a unit of Citra Metro Manila Tollways Corporation    10 km (16 km including stage 2) 
Southern Tagalog Arterial Road (Star Tollway) STAR Infrastructure Development Corporation (STAR - IDC)    41.9 km
Subic-Clark-Tarlac Expressway (SCTex) Tollways Management Corporation, unit of Metro Pacific Tollways Development Corporation,   94 km

The VAT, which will impose an additional 12% on the toll rate, was pursued by the Bureau of Internal Revenue (BIR), which is tasked to collect about three-fourths of the national government's total revenue collections. The VAT on fees in all tollways in Luzon, amounting to some P1.3 billion, was expected to help plug a gaping budget deficit that could reach a record high of P325 billion, or 3.9% of the GDP, this year.

BIR chief Kim Jacinto-Henares told reporters on Friday that the bureau is still hoping to obtain a favorable ruling on the matter. "I hope we can collect the 12% VAT on toll before the end of the year," Jacinto-Henares said.

The BIR earlier directed the Toll Regulatory Board to implement the VAT on toll rates starting August 16, a Monday, but the TRO was issued right before that date stopped it.

"Collecting taxes has been a perennially thankless and unpopular act. Nobody wants to pay taxes but somebody has to collect and implement the law so that we can fund various urgent projects of the government like health care, education and social services, among others," she earlier told lawmakers.

Once the TRO on VAT is lifted, Jacinto-Henares stressed that the impact on motorists, especially those plying the South Luzon Expressway (SLEx) where a possible 250% toll hike is looming, will be "minimal."

She also added that the tax collecting agency should have been collected the VAT since 2005 but this was deferred because of administrative setbacks and opposition from toll operators. "We are merely implementing the law," she said, stressing that the amendments on the VAT law in 2005 had included the receipts of franchise holders such as toll operators, which are subject to VAT.

In a previous Senate hearing, Sen. Ralph Recto, co-author of the 2005 VAT law, and tax law experts Senators Frank Drilon and Juan Ponce Enrile insisted that imposing the VAT on toll fees has no legal basis and cannot be justified.

The senators had said that it was never the intention of the VAT law impose a user's tax on essential government services, which include roads.

The Supreme Court issued the TRO on VAT last August based on the petitions filed by former Nueva Ecija congressman Renato Diaz and former Trade assistant secretary Aurora Ma. Timbol who argued that imposing VAT on tolls on roads and highways is unconstitutional and an “invasion of legislative powers.” - with reports from Ina Reformina, ABS-CBN News