MAY 17, 2006
 (STAR) By Des Ferriols - The government is expecting to forego over P5 billion in revenues with President Arroyo’s decision to temporarily slash tariffs on crude oil and refined products to cushion the impact of record-high world market prices of crude oil on local gasoline prices and the economy.

The Bureau of Customs (BOC) estimated that, for the next six months, the government would lose up to P1.727 billion in waived duties on crude and petroleum products if the duty rate is reduced from the current three to two percent.

If the rate is reduced to one percent, government’s foregone revenues would go up to P3.455 billion and at zero percent, the amount would go up to P5.182 billion.

The tariffs will be reduced depending on the world market price for crude oil.

The Arroyo administration was also under pressure to suspend the expanded value-added tax (VAT) on oil but the Department of Finance (DOF) said this should not be the first response, especially if soaring oil prices are temporary.

The initial reaction to the proposed lifting of the VAT on oil products was generally negative especially with the anticipated impact on the government’s fiscal program aimed at bridging the budget deficit by 2008.

Finance Secretary Margarito Teves said tax measures should not be a knee-jerk reaction to rising oil prices unless the situation would be deemed long-term and permanent.

"We need a clearer reading of the situation, principally from the Department of Energy, to determine whether or not the situation is temporary," he said.

The waiver or even a temporary suspension of the VAT on oil and oil products would require another act of Congress since the expanded VAT law could not be amended by an executive order from the President.

Teves said the government was expected to raise around P30 billion to P35 billion from the VAT on petroleum this year, equivalent to 40 percent of the P75 billion that the government expects to generate from the increase in the VAT rate from 10 percent to 12 percent.

"Clearly, VAT collection from petroleum products contributes a lot to the government’s revenue generation efforts," Teves said.

For the first four months of the since the reformed VAT law was implemented, Teves said actual collections from the VAT on oil reached P11.9 billion.

This amount, according to Teves, already accounted for 77 percent of the P15.5 billion in gross revenues from the VAT during the period. Losing this much revenue would upset the government’s fiscal program, he said.

"The situation needs very careful study," Teves said. "Whatever measures the government has to take must ensure that the most needy sectors will be the main beneficiaries."

He said Mrs. Arroyo’s economic team was in close consultation with the business community to determine what could be workable in the meantime.

"We have to balance the need to achieve our fiscal goals while being sensitive to the immediate needs of the people," he said.

Even the prospect of amending the VAT law, according to finance officials, would create problems that could reverse the government’s fiscal recovery program.

BIR short of target

Already, the government is facing a potential problem.

The Bureau of Internal Revenue (BIR) fell short of its P79-billion collection target in April, reaching only P71.3 billion.

Official data from the BIR revealed that April collections surpassed the P63 billion collection over the same period last year but fell short of the target even with the increase in corporate income taxes.

The DOF is investigating the shortfall during what is considered the strongest revenue month of the year, with the annual deadline for income tax filing falling on April 15.

Finance officials are at a loss to explain the April collections of the BIR which fell about P6 billion below expectations.

April is the BIR’s peak collection month with the bureau getting the bulk of its income tax collection at the end of the fiscal year.

Finance Undersecretary Gil Beltran said the DOF is waiting for the BIR’s complete report and will study the breakdown of collections to determine where its efforts weakened or failed.

"Right now, we really can’t explain why, especially since the economy is strong and corporate income taxes alone are up to levels that we haven’t seen in a long time," Beltran said.

According to Beltran, April collections normally increase by 15 to 16 percent year-on-year. At this historical growth rate, collections should have reached at least P73 billion compared to P63 billion collected in April last year.

The DOF earlier reported that corporate income taxes alone went up by 20 percent in the first quarter of the year due to the combined effects of rising corporate incomes and the increase in the corporate income tax rate from 32 to 35 percent.

Beltran said that based on emerging data, corporate incomes went up by at least 12 percent in the first three months of the year, boosting tax revenues from corporate income taxes.

Palace calls for ‘ener-con’

Time to tighten those belts another notch.

Malacañang reiterated yesterday its call for the public to conserve energy and cut down on unnecessary expenses amid escalating fuel prices as it gave assurances that the order to lower crude oil tariffs would be followed by other mitigating measures.

Press Secretary Ignacio Bunye said the administration would do its "utmost to shield our people from the impact of oil price hikes."

"We call on all sectors to conserve energy and plan each trip carefully to cut down on fuel and other expenses," Bunye said.

"The lowering of crude oil tariffs will be followed by other measures to meet any exigencies arising from fluctuations in the price of oil in the world market," he said.

He said the implementation of safety nets "to cushion its impact on consumers, especially the poor, are of urgent concern to the President and her Cabinet." — Paolo Romero

Chief News Editor: Sol Jose Vanzi

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