, JANUARY 8, 2007 (STAR) By Marvin Sy - President Arroyo and the Cabinet are expected to come up with a decision today on the proposed reduction on the tariff on imported oil to minimize the impact to consumers of rising oil prices in the world market.

Energy Secretary Angelo Reyes said the recommendation would be made by the National Economic and Development Authority (NEDA) during today’s Cabinet meeting following the conclusion of discussions with the Tariff Commission.

World oil prices hit record highs last week and concerns have been raised about the impact of the price surge on domestic fuel prices.

The reduction of tariff on oil imports is one of several proposed measures that could be implemented immediately and would have minimal impact on government revenues.

Reyes said that the proposal could be a one, two or three-percent reduction, with three percent being the current rate.

However, Reyes admitted that the impact of the tariff reduction on actual pump prices would not be too significant.

He explained that for every one percent reduction in the tariff rate across the board, the impact would be a 23-centavo to 24-centavo reduction in the price per liter of all petroleum products.

As an example, Reyes noted that with a one percent tariff reduction, a 50-liter purchase of gasoline at P40 per liter would translate to savings of only P12.

But if the tariff reduction is applied to diesel only, Reyes pointed out that the reduction in pump prices would translate to a reduction of 70 centavos per liter.

“The President will decide whether to approve, then an executive order will be issued, published and the Department of Energy will come up with guidelines. The process will take anywhere from one to two weeks,” Reyes said.

Reyes said that he is confident the tariff reduction proposal would be adopted by the Cabinet.

Another proposal being studied by the government is for the suspension of the collection of the 12 percent value added tax (VAT) on oil.

Sen. Manuel Roxas II earlier made the proposal, pointing out that the price impact would be more significant than the tariff adjustment.

While acknowledging that the impact on pump prices would be significant, Reyes noted that Roxas’ proposal would be more difficult to approve because of the huge revenue implications.

Reyes said that the suspension of the VAT on oil would mean a reduction on the price of oil by around P4 per liter.

On the other hand, the government would lose around P52 billion in revenues if the VAT suspension is implemented.

As far as more drastic measures such as a rationing of oil are concerned, Reyes said that this would be considered only if the problem goes beyond the realm of pricing.

“We will have to watch the situation. We will have to calibrate the response to see if it is appropriate to the problem being addressed. You might have a situation where the cure is more deadly than the disease,” he said.

“Right now we still have a pricing problem and not a supply problem. If the problem goes to the extent that it’s not just pricing, then we can study those options,” he added.

An energy summit has been called by President Arroyo to study the measures to address the rising cost of fuel.

The order of the President came last week in response to the price of oil in the United States hitting $100 per barrel.

Reyes said that the summit would be held within the month and all the stakeholders from the private sector and government will be invited.

He said that the DOE is finalizing the design of the summit and would present it to the President today.

“We want to do a serious summit that will result in action, an action plan that will be implemented. We want to do this properly so that it won’t be an exercise in futility,” Reyes said.

He said that it is important for all stakeholders to arrive at a consensus so that the implementation of the program would run smoothly and be more effective.

Arroyo orders study of LGUs’ request to increase IRA share By Paolo Romero Tuesday, January 8, 2008

President Arroyo ordered yesterday the creation of a committee to study the proposal of local officials to increase the local government units’ share of the Internal Revenue Allotment (IRA).

Eastern Samar Gov. Ben Evardone, secretary of the League of Provinces of the Philippines and spokesman for the Union of Local Authorities of the Philippines, told reporters of the move following a meeting between Mrs. Arroyo and Interior Secretary Ronaldo Puno and local officials at Malacañang.

Evardone said the LGUs are also pushing for the return to the national government of the running of district hospitals and provincial jails since operating them eats up a huge chunk of their budgets.

The committee will be composed of representatives from LGUs and officials from the Department of Finance (DOF) and Department of the Interior and Local Government.

He said the LGUs are pushing for amendments to the 1991 Local Government Code (LGC) to increase their current 40 percent share from the IRA. The national government gets 60 percent of the IRA, which is the share from national taxes collected three years before.

“There’s a strong clamor to increase the 40 percent (IRA share for LGUs), but of course we have to consult the DOF because the effort to achieve a balanced budget might be affected,” Evardone said.

As set by the LGC, the total IRA pie is divided as follows: 23 percent to provinces; 23 percent to cities; 34 percent to towns and 20 percent to barangays.

The share of an LGU is determined in turn by its population and land area, and the principle of “equal sharing.” As revenue collections increase, so does the IRA share of the LGUs.

Budget Secretary Rolando Andaya Jr. said in 2006, IRA was P166.46 billion. By 2008, IRA is expected to increase by one-fourth, or by P44.2 billion, he said.

As of February last year, there were 82 provinces, 118 cities, 1,507 towns, and 41,885 barangays in the country.

Because the IRA is deemed automatically appropriated, Andaya said it will be released to LGUs in full and on time regardless of any delay in the passage of the proposed P1.227-trillion national budget.

Evardone said in his province, operating the district hospital eats up 40 percent of the provincial government’s total budget.

“We cannot fully implement the Magna Carta for Health Workers, which gives many allowances, like laundry allowance. It also creates tension with capitol employees who do not have many allowances,” he said.

He said LGUs are also proposing the return of the operation of the provincial jails to the Bureau of Jail Management and Penology as LGUs also operate other jails.

Puno, whose department supervises the BJMP, proposed a “cost-sharing” scheme with the LGUs.

Chief News Editor: Sol Jose Vanzi

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