GOVERNMENT TO LOSE P54 B IN REVENUE WITH EVAT SUSPENSION - TEVES
MANILA, JANUARY 10, 2008 (STAR) By Iris Gonzales - While the suspension of the 12 percent value-added tax on oil may help trim pump prices by as much as P4 per liter, it will also translate to P54 billion a year in foregone revenues, according to Finance Secretary Margarito Teves.
Teves raised the warning in response to calls, particularly from senators, for the government to suspend the VAT on oil instead of cutting the three percent tariff on oil imports.
“I hope that the executive branch, the Senate and the House can work together in coming up with a mechanism that would not translate to revenue losses for the government,” Teves said.
“What we want is to maintain the P54 billion and channel it to the affected sectors,” Teves said.
It was Sen. Manuel Roxas II who first broached the idea of cushioning the impact of spiraling crude prices by removing the 12 percent VAT on oil.
President Arroyo ordered the tariff reduction on Tuesday in a bid to temper the effect of the record-high global crude prices on poor Filipinos.
Teves, also last Tuesday, said the three percent duty would be cut to two percent, and that more cuts would be made “if crude oil prices stay at $92 a barrel.” On Friday last week, global crude prices hit the dreaded $100 per barrel mark.
He said every percentage reduction in the oil tariff would translate to a pump price cut of 23 centavos to 25 centavos, or 46 centavos per liter if applied to diesel only.
Senators firm on stand
Senators vowed yesterday to legislate the scrapping or the suspension of the 12 percent VAT on oil.
Sen. Francis Escudero, chairman of the Senate ways and means committee, belittled the tariff cut on oil imports ordered by Mrs. Arroyo, calling it “a cut that doesn’t quite make the cut in terms of cushioning the impact of high oil prices.”
Escudero said the projected drop in pump prices as a result of the tariff cut “is a drop in the oil barrel.”
“If the motive of reducing the tariff on oil is to signal the President’s concern on rising oil prices, then it clearly fell short of its target, because a one (percentage point) cut, by any standard, is unalloyed tokenism,” Escudero said.
“Malacañang’s intransigence on this matter shows that the much ballyhooed oil summit is all for show. It will be a scripted monologue because government will only be talking to itself,” Escudero said.
Mrs. Arroyo, shortly after ordering the tariff cut, said the suspension of the 12 percent VAT would be “counterproductive.”
Roxas, chairman of the Senate committee on trade and commerce, said the government should improve its tax collection efficiency instead of imposing more taxes on the people.
“First of all, the government can make the collections much more efficient. Second, why are they passing on to us the problem of their inability to perform their duty?” Roxas said.
“They say they can’t do their task and keep collecting VAT on oil products. Let’s turn this equation a bit: Do your job well, give back to us our money, because we need it at this time,” he added.
Roxas said economic conditions have improved in the past four years, and the government could deal with the revenue impact of VAT suspension for six months.
“The sickness of the economy four years ago was fiscal crisis, and we solved this with the VAT. Now, the economy and the circumstances in the world have changed. To keep applying the same cure to a sickness that is no longer present is wrong policy,” he said.
“The present sickness is the very, very high cost of living, principally brought about by $100 per barrel oil,” Roxas added.
“We have here something that the government can do – remove the VAT on petroleum products. In effect, we pump P4 with each liter of diesel, P65 with each 11-kilo LPG tank, back into the economy, and give our people much needed relief,” Roxas said.
Sen. Juan Miguel Zubiri said the tariff cut is not enough and should be complemented by the scrapping of the 12 percent VAT on oil.
“My proposal from day one is permanently remove it (12 percent VAT),” he said.
Escudero said the government should have adopted a lower trigger for the complete scuttling of the three percent oil tariff, which, based on Mrs. Arroyo’s order last Tuesday, will only be scrapped if the Dubai crude hits $106 a barrel.
Escudero said the government’s P54-billion projected take from VAT alone on crude oil and finished petroleum products was premised on an average $66 price of a barrel of Dubai crude.
“She should also address the oil shock problem from the demand side, by making the government the paragon of energy conservation, by easing traffic in cities, as gridlock adds up to the national oil bill, by calling for surcharges on gas-guzzling luxury cars, by tapping renewable sources of energy that will replace fossil fuel,” Escudero said.
Militant group Bagong Alyansang Makabayan, for its part, said local fuel prices will remain high unless the 12 percent VAT or the Oil Deregulation Law is scrapped.
“A basis for these sharp increases can be traced to intense speculation in the oil industry,” Bayan said. “It is in the interest of the oil monopolies that prices go up.”
“It will not give substantial relief, if there will be any relief at all, to our people who are reeling from high prices of oil and consumer products and services,” Rep. Florencio “Bem” Noel of the party-list group An Waray said.
He said that exempting oil importation from the 12 percent value-added tax would be more helpful than the tariff cut.
“For any relief to be felt by our people, the government should give up part of the tens of billions of pesos it collects yearly in VAT levies by exempting oil products and electricity from VAT,” he stressed.
For Davao City Rep. Prospero Nograles, the tariff cut is unlikely to compel oil firms to lower pump prices.
“The oil companies have already mastered the art of justifying even the most unjustifiable alibi whenever they increase prices. They will certainly find another excuse why they cannot reduce prices even with this reduction of oil importation tariff,” he said.
“While the increasing cost of oil in the world market is really a cause for concern, this proposal of reducing oil importation tariff will not give us any assurance that this would benefit the ordinary consumers,” he reiterated.
He said he found it strange that pump prices continue to rise despite the steady strengthening of the peso.
He said “it is basic that the prices of imported commodities including oil should be cheaper each time the dollar weakens.”
Nograles also accused the oil companies of selling their old stocks at higher prices.
“They have the tendency of selling their old inventory using the new world market rate and until after there is a daily and verifiable way of monitoring their stock inventory, any plan to reduce oil importation tariff is a lopsided arrangement,” he said.
“Experience tells me that these oil companies do not have any intention at all of making life more comfortable for ordinary mortals like us,” Nograles stressed. “We should keep the present rate so that at least we are getting something from them.”
Oil companies gave no assurance of pump price reduction after President Arroyo ordered the tariff cut.
Not surprisingly, presidential son and Pampanga Rep. Juan Miguel “Mikey” Arroyo said his mother made the right move, although there’s still much to be done.
“Let us find the right formula that could cushion the effect of high oil prices on our people. But let us hear the experts. It is not for us politicians to say what is the correct formula,” Arroyo, House energy committee chair, said. - With Christina Mendez, Aurea Calica, Katherine Adraneda, Jess Diaz, Delon Porcalla
Chief News Editor: Sol Jose Vanzi
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