MANILA, August 15, 2005
(STAR) By Paolo Romero - President Arroyo is studying the possibility of suspending the implementation of some provisions of the expanded value-added tax (EVAT) law to address the looming oil crisis, a ranking Malacañang official said yesterday.

The official, who asked not to be identified, said Mrs. Arroyo has sought legal opinions on suspending the expanded VAT on power and oil once the Supreme Court (SC) lifts its temporary restraining order (TRO) on the tax law in light of the historic high price of $67 per barrel of crude oil.

"She has already sought legal opinions on how to legally postpone the provisions on oil and power… once the TRO is lifted and the prices have not stabilized," the official said. "Because of our dependence on imported fuel, even mitigating measures will not be enough."

The official said it was the Palace’s initial opinion that, based on initial hearings at the SC on the legality of the EVAT, the law would be upheld and would give the administration "legal space" to suspend the implementation of the tax on the power and oil sectors.

"We hope that the SC would act expeditiously on our lawyers’ stance," the official said.

Meanwhile, Executive Secretary Eduardo Ermita said the President signed an executive order mandating energy conservation in government offices and agencies to help reduce the country’s power and fuel consumption.

He said the President signed on Saturday the still unnumbered EO, which also directs government agencies and offices to implement their energy conservation measures with quantifiable results.

"The EO is already a specific instruction to the different departments to implement energy conservation," Ermita said in a telephone interview. "This will also result in savings for the offices concerned."

He said the EO would complement Administrative Order No. 103, which the President signed in August last year, mandating austerity measures for all national government agencies, including government-owned and/or controlled corporations and state colleges and universities.

Mrs. Arroyo last July issued another administrative order banning government officials from using luxury motor vehicles and ordered all state agencies to auction off all such vehicles in their fleets within 60 days.

The order directed all government offices and state-run banks, universities and corporations to observe a February 2001 presidential order that bans the acquisition and use of luxury vehicles by all government officials.

Asked whether the move to suspend some provisions of the VAT would upset the markets, the official said, "We’re beyond that already, the (world oil) prices is way too high."

The official said it only the VAT on oil and power will be suspended. A 10-percent VAT was slapped on the two sectors, which were previously exempt from the tax. To mitigate its effect on the power and oil firms, the excise tax on imported petroleum products was greatly reduced.

The President’s fiscal managers had projected that P28 billion would have been generated from the power and oil sectors this year with the implementation of the EVAT. However, the implementation of the EVAT was temporarily suspended by the SC.

Albay Rep. Joey Salceda, chairman of the House committee on economic affairs and one of the President’s close advisers, supported the move.

Salceda said levying VAT on oil and power companies could do more harm than good to the economy at this time.

"Even for one who is the most rabid fiscal hawk in government, I can’t be oblivious of the oil price spike and its impact on consumer welfare and the general economy," Salceda said. "The inherent contractionary impulses of fiscal measures would be so magnified as to overwhelm most of its beneficial impact."

"Imposing the oil and power VAT at this point would do more harm... than good to our economy and even upset our fiscal goals as it would... stoke consumer pessimism," he said.

He said the VAT may be imposed on oil and power when world oil prices drop to $50 per barrel, where a tax imposition would be tolerable. At $67 per barrel, pump prices for unleaded gas would easily exceed P40 even with mitigating measures, he said.

Salceda said the P30 billion "surplus" in the projected deficit in the first half of the year would be enough to compensate for the P28 billion revenue loss from the selective suspension of the EVAT.

While the government’s economic managers are keenly sensitive to the market signals of a suspension, Salceda said it would be fiscal folly — even suicidal — to insist on its implementation at this point even if there were no political crisis.

The government, he said, would do well to accelerate sale of its assets, including the rebidding of its stake in the Malampaya gas project in Palawan. Salceda also suggested that the government open more exploration contracts and study the possibility of using nuclear power to meet the country’s energy requirements.

Meanwhile, Press Secretary Ignacio Bunye called on all political leaders, including the opposition, to encourage the people to conserve energy and forge unity in seeking solutions to the oil crisis.

"We face a looming energy crisis of unprecedented proportions and the whole nation must be galvanized to meet it with unity and vigor," Bunye said. "We call on all political leaders, including the opposition, to take the high road of statesmanship, set partisanship aside and join the people in seeking solutions."

"We cannot afford a divided nation amid this oil crisis. We have to unite to endure and survive, and let not the people blame their leaders for not taking up the challenge," he said.

Former President Fidel Ramos, meanwhile, urged Malacañang to push for a bill mandating energy efficiency and independence as part of the long-term measures taken by government to reduce the country’s dependence on imported fuel.

The Department of Energy (DOE) said the country’s oil import bill amounts to P324 billion annually. The imported oil accounts for about 37.01 percent of the country’s energy requirements.

While the government is now undertaking energy conservation measures, it accounts only for a small fraction of the country’s total energy consumption. Industries, households and motor vehicles account for the bulk of the country’s fuel consumption, the DOE said.

Reported by: Sol Jose Vanzi

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