Shanieca Chu Tax 2 November 24,

2017
BSBA-4 Maam Emata

History of VAT in the Philippines

Value added tax or VAT was introduced less than 50 years ago and remained confined
to a handful of countries until the late 1960s. Today, however, most countries impose VAT
which raises on the average of about 25% of their tax revenues. VAT was one of the most
important fiscal innovations of the second half of the 20th century that largely replaced turnover
taxes, a defective form of tax, with no relief for tax paid at previous stages.
VAT was first introduced in the Philippines in 1988 through Executive order number 273
replacing the following indirect taxes:
- annual fixed taxes
- original sales tax on manufacturers and producers
- turnover tax on subsequent sellers
- advance sales tax
- compensating tax on importation of goods
- Miller tax
- Percentage tax on contractors, brokers, lessors of personal property/cinematographic films
- excise tax on certain articles
On 1996, there was a revision on the law, R.A 7716, Expanded Vat (EVAT) law
(inclusion of sales, barter, exchange or lease of intangible and real properties; and sale of
services in the Philippines by a non-resident person). On 1997, R.A 8241, Improved VAT(IVAT)
law (restoration of certain operators under the coverage of the common carrier's tax). On 1998,
R.A 8424 tax reform act of 1997. On 2005, R.A 9337 expanded VAT act of 2005.
The Extended Value Added Tax (EVAT) Law or Republic Act. 9337 was enacted and
begun in Metro Manila, on July 26, 2004.
This Act which is a consolidation of House Bill No. 3555, House Bill No. 3705 and
Senate Bill No. 1950 was finally passed by the House of Representatives and the Senate on
May 11, 2005 and May 10, 2005, respectively. But it was imposed a temporary suspension by
the Supreme Court a few hours after it went into effect on July 1 because of a petition from
opposition lawmakers questioning its legality.
The suspension, however, was considered as a victim of the rift between the
administration and the political opposition over the corruption and election fraud charges against
President Arroyo.
This delay in the EVAT Law, according to a Business World Research article, worsened
the budget deficit; foregone revenues are estimated to be around P5 billion.
The Expanded value-added tax (E-VAT) law was instituted as a measure to bridle the
rising foreign debt of the Philippines and to improve government services such as education,
health care, social security, and and transportation. It forms part of the package of measures
Malacaang had endorsed to help shore up the governments fiscal position and reverse the
credit rating downgrade certain rating agencies had given the Philippines.
 This law was made on account that the more taxed a government can collect, the more
services and programs of the government can be implemented as infrastructure projects. The
EVAT law granted President Arroyo the stand-by authority to raise the tax from the current 10
percent to 12 percent under certain conditions. This would help in increasing government funds
and helps alleviate government deficit so that a inflation rate and unemployment can be
overcome.
Insights on VAT of different ASEAN countries:

Sources:
http://evat-atenista.blogspot.com/2007/09/brief-history-and-rationale.html
https://www.scribd.com/doc/67229935/3-Value-Added-Tax-Its-Impact-in-the-Philippine-Economy
http://www.business-in-asia.com/asia/taxation_asia.html