VAT  ON  OIL  TO  STAY - DOF

MANILA, MAY 26, 2008
(STAR) By Iris Gonzales - Finance Secretary Margarito Teves and other economic managers have rejected a proposal to scrap the value-added tax (VAT) on oil. Instead, they have decided to look for other ways to cushion the impact of rising oil prices on consumers.

The Department of Finance (DOF) estimates that VAT on oil will yield an additional P18 billion this year if the price of oil continues to hover at $100 per barrel.

“We are looking for ways to allocate the P18 billion,” Teves told reporters.

Economic managers want to allocate the estimated P18-billion “windfall” collected from VAT on oil this year to various sectors, Teves added.

Teves said among the proposals being considered is to use the revenue to subsidize transport groups or to fund food subsidies for the poor.

“The idea is to reallocate the revenues instead of scrapping the VAT,” he said. “Our preference is that the resources will be allocated for the poor.”

The government will lose P45.7 billion in revenues yearly if VAT on oil is suspended, the finance department revealed. In a position paper, the DOF said removing the VAT on oil would only benefit those in the higher income brackets.

“Our studies based on the Family Income and Expenditures Survey of 2003 show that 40.7 percent of the benefits (P18.6 billion) from suspension of VAT on oil will accrue to income groups earning P250,000 and above,” the DOF said. “Another 41.3 percent (P18.9 billion) will accrue to income groups earning P100,000 to P249,999.”

However, IBON, a non-government think-tank, said the removal of the VAT on oil is a more effective solution to high oil prices.

“Removing the VAT on oil will immediately bring down pump prices by as much as P5 per liter and directly relieve consumers, unlike the oil tariff cut that only relieves oil companies from paying import duties,” IBON said.

Oil companies have been raising pump prices by P0.50 to P1 per liter weekly for the past five weeks.

Meanwhile, Sen. Juan Miguel Zubiri called on the House of Representatives yesterday to push for the removal of the expanded value added tax on oil and other petroleum products.

Sen. Juan Ponce and Zubiri are also seeking the removal of EVAT on electricity.

Zubiri said as a former House member, he could understand that some measures there would not be pushed “without a go signal from Malacañang.”

However, he had spoken with the Department of Finance and the Department of Trade and Industry about his proposal to limit the lifting of EVAT on oil and other petroleum products to jeepneys, buses, and cargo trucks delivering basic necessities, he added.

Zubiri said government revenues would go up as EVAT being collected would increase along with the rise in fuel prices.

“Without such a proposal to help cushion the impact of rising cost of fuel on consumers and the riding public, the government would make P80 billion (in a year) but at the expense of the commuters, farmers, manufacturing plants of our basic commodities and air and sea transport sectors that not only bring our people to other parts of the country but is used for tourism as well,” he said.

Zubiri said with the government collecting $15.60 or P670 EVAT per barrel at the price of $130, the government can earn a total of P143 million in revenue on oil imports a day.

“The last thing we all would like to see is the government laughing all the way to the bank at the expense of its people,” he said.

“The government as it stands will gain a huge windfall from the increasing fuel prices. It would be ironic that government revenue will balloon to such high levels but at the expense of the riding public and the rest of the country.”

Zubiri said commuters would not only have to pay higher fares but cost of food would also increase due to the expense in shipping.

“Congress is hell bent on raising the take home pay of minimum wage earners,” he said.

“However, the rising fuel prices will just eat all their savings up at the end of the day. I believe that the tariff reduction of imported oil is not enough to help the consumers, especially with the prognosis that the world price of oil will hit as high as $200 per barrel or roughly P100 per liter gasoline prices by next year.”

The Congressional Planning and Budget Department reported that the DOF was now enjoying a P16.7-billion windfall from EVAT on petroleum.

Speaker Prospero Nograles said the amount should be “re-channeled toward subsidizing” the public’s electricity and fuel consumption.

“This sector comprises 3.9 million households or approximately 96 percent of the residential households in the entire Meralco franchise area,” he said.

“The P10.2-billion balance should be used to provide subsidy in fuel consumption, of which amount around P8.3 billion shall be used in providing approximately P1.30 per liter subsidy for diesel to benefit public transport utilities as well as commuters, and P1.9 billion shall be redistributed to subsidize P1 per liter LPG (liquefied petroleum gas) consumption of households.”

All tax measures emanate from the House. – With Aurea Calica


Chief News Editor: Sol Jose Vanzi

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