WITH EVAT, OIL PRICE HIKE AT 6% RATHER THAN 10%
MANILA, September 7, 2005 (STAR) By Christina Mendez - The Department of Energy (DOE) announced yesterday that implementation of the expanded value-added (EVAT) law would only translate to a "slight increase of 6.4 percent on the average" rather than the full 10 percent due to the mitigating measures included in the tax reform law.
"There is an impact of only 6.4 percent on the average. Why? Because of the removal of the excise tax and the reduction of the tariff from five to three percent. So that is 6.4 percent on the average," Energy Undersecretary Melinda Ocampo told the Bulong Pulungan media forum at the Westin Philippine Plaza in Pasay City in a bid to allay public fears that implementation of the EVAT would mean higher prices of commodities.
Ocampo pointed out this is "good news" for the consumers because the mitigating factors have reduced the VAT rate to only 6.4 percent.
The franchise power on power distribution utilities was removed to also mitigate the impact of the EVAT on power rates, officials said.
"When it comes to electricity, it will be different per (power) utility because we have 24 private and government utilities, and 219 cooperatives. We have to treat them individually because they have different rates and so the impact varies based on existing rates," Ocampo explained.
Despite a temporary restraining order (TRO) from the Supreme Court, Ocampo insisted the government will implement the EVAT law as soon as possible, citing the need to generate new revenues for the government.
Under the new VAT law, the mitigating measures removed the excise tax on socially sensitive products like diesel (used by public transport vehicles), kerosene (used for lighting purposes in the countryside) and fuel oil (used for power generation).
The VAT Reform Act, also know as Republic Act 9337, reduced the excise tax on regular unleaded gasoline.
The SC last week upheld the constitutionality of RA 9337, but it has yet to lift the TRO on its implementation.
During the forum, Ocampo also supported statements made by Finance Undersecretary Noel Bonoan, who earlier opposed a Senate bill seeking to exempt oil and power from the EVAT coverage.
Bonoan, who was also present in the forum, said they have argued with the Supreme Court on the need for government to increase its revenues.
Ocampo added that the DOE will also join the Department of Finance at the Senate tomorrow to convince lawmakers of the need for the government to implement the EVAT law, and to object to Sen. Mar Roxas’ move to defer its implementation on fuel and power until next year.
"Definitely, we will support the government because we need revenues. We are not actually rejecting (Roxas’ proposal), we are open (to it) but that will be based on their judgment because they are the lawmakers. We will just implement whatever they will approve," Ocampo noted.
For her part, Trade Undersecretary Zenaida Maglaya also contradicted Roxas’ claims that there is only "panic selling," not panic buying.
Maglaya said local traders have admitted to a slowdown in sales due to the price increases on basic commodities.
Maglaya said local businessmen are looking forward to the holiday season when they could regain lost profits in the last few months of the year.
In a briefing, finance and energy officials argued that the reduction of excise tax on kerosene, diesel and bunker fuel oil has cushioned the impact of imposing the VAT on fuel.
Ocampo’s statement came amid criticisms from Albay Rep. Joey Salceda, a key economic adviser of President Arroyo, who slammed the finance department over the weekend for insisting on the implementation of the EVAT law on oil and power despite the escalating prices of crude oil in the world market.
Ocampo said DOE officials will attend the hearing initially set at 9:30 a.m. by the Senate committee on energy chaired by Sen. Miriam Defensor-Santiago to discuss the resolution introduced by Roxas to exempt power from EVAT.
The committee also scheduled for the same hearing discussions on possible amendments to the Electric Power Industry Reform Act.
August inflation rises to 7.2%; BSP may hike rates The Philippine Star 09/07/2005
The country’s inflation rate accelerated to a higher-than-expected 7.2 percent in August as global oil prices surged to record levels, prompting a Bangko Sentral ng Pilipinas (BSP) warning that interest rates may be raised.
The National Statistics Office (NSO) reported yesterday that the increase in consumer price index topped the BSP’s forecast range of between 6.6 and 7.1 percent for August. Inflation stood at 7.1 percent in July.
BSP Governor Amando Tetangco Jr. said the higher-than-expected inflation last month, coupled with increasing liquidity and a narrowing interest rate differential between the Philippines and the US, would have to be closely monitored.
"Given this, we cannot rule out possible tightening (rates) in the short run," Tetangco said.
The BSP usually either raises its benchmark overnight interest rates or increases the amount of funds the commercial banks are required to place with the BSP when it tightens its monetary stance.
"The market is expecting a policy move especially if there is deteriorating in the factors that BSP mentioned," said Jose Mario Cuyegkeng, economist at ING Bank.
Economists previously said there was room for at least one more increase in BSP’s interest rates this year.
Monetary authorities raised overnight rates by a quarter of a point on April 7–the first rate change in nearly two years–to curb growing inflationary pressures fueled mainly by high oil prices.
The BSP’s key overnight borrowing rate is now at seven percent and its lending rate at 9.25 percent.
Monetary authorities also raised the reserve requirements–which dictate the amount banks must park with the BSP–by two percentage points to 21 percent on July 7, a move analysts said was aimed at protecting the peso from political uncertainties.
Rising costs of housing and related services accounted for the increase, the government statistics office said. Housing and repair costs rose 4.8 percent in August from 4.7 percent the previous month. Services, which include transport costs, rose 10 percent from 9.9 percent in July.
Prices of fuel, electricity and water increased 18.7 percent after an 18.9 percent gain in July.
Compared to July, consumer prices in August rose 0.5 percent after gaining 0.9 percent in the previous month.
For the eight months to August, inflation averaged 8.1 percent, more than the BSP’s full-year forecast of 7.9 percent.
Tetangco had said on Monday that "average inflation in 2005 and 2006 will likely exceed targets" due to soaring global oil prices.
The government now expects inflation to average 7.9 percent this year and 7.5 percent in 2006, compared to current government targets of five -six and four to five percent, respectively. – AFP
Chief News Editor: Sol Jose Vanzi
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