What is E-VAT??

Value-Added Tax is a form of sales tax. It is a tax on consumption levied on the sale of goods and services and on the imports of goods into the Philippines. It is an indirect tax, which can be passed on to the buyer.

The Philippines Increases VAT

The Philippine Supreme Court has reinstated a controversial tax law that removes indirect tax exemptions and paves the way for a planned 2% rise in value-added tax (VAT).

The extended value-added tax (EVAT) law is a key component in President Gloria Macapagal Arroyo's tax policy, which was introduced in May to help close the country's gaping budget deficit. It was put on ice in July following concerns about its constitutionality. The Supreme Court has now approved it after rejecting several petitions.

New measures include the cancellation of VAT exemption for fuel and electricity and increasing the general VAT rate from 10% to 12%. Arroyo hopes this will boost government revenues and combat burgeoning debt in the Philippines, which has tripled to $69 billion since 1997. "I remain firmly committed to continuing the process of reform which will end years of economic challenge and put our fiscal house in order," said Arroyo.

The dispute over EVAT comes amid attempts to impeach Arroyo in the wake of an election fraud scandal. Opponents of the president, who is a Harvard-trained economist, point to the country's dismal economic situation as evidence of her unsuitability for the position.

The revised VAT rates will be effective from January 1 2006.