JULY 9, 2008 (STAR) The government is open to a temporary cut in the expanded value-added tax (EVAT) on oil but is firm against scrapping the measure as demanded by many sectors including religious leaders.

Meanwhile, Press Secretary Jesus Dureza said Cabinet officials are set to meet with the Catholic Bishops’ Conference of the Philippines (CBCP), the latest group to call for the abolition of EVAT.

Socio-economic Planning Secretary Augusto Santos told a news briefing at Malacañang that a possible “calibrated response” to the clamor for scrapping the VAT is the lowering of EVAT in such a way that it would be “revenue neutral” or would not adversely affect the government’s revenue stream.

“Maybe we can lower the VAT rate to the extent that the government will not generate additional revenues and give that (forgone revenue) to consumers,” Santos said.

“Effectively we are not suspending but only lowering (VAT)…and this is a compromise,” he said.

Santos stressed, however, that lowering the VAT rate is only an “option” and requires an amendment of the law by Congress. He pointed out the VAT law fixed the rate at 12 percent.

He said the government at the start of the year had factored in the VAT revenues in setting its spending programs. Soaring oil prices have generated excess VAT revenues.

After meeting its revenue goals from VAT, it may now be comfortable for the government to forgo additional VAT revenues from increasing oil prices.

Meanwhile, Finance Secretary Margarito Teves yesterday said the rich – the biggest oil consumers – and not the poor will benefit most from the scrapping or suspension of the controversial expanded value added tax on oil.

Teves was reacting to the growing clamor for the scrapping of the 12-percent EVAT on petroleum products, the latest of which came from the CBCP.

“Such proposal, however, would mean P73.1 billion in foregone revenues yearly which the government could otherwise use to fund programs to help the poor cope with rising oil and food prices,” he said.

Teves said stopping the collection of EVAT on oil would be most advantageous to the rich because they are the biggest fuel spenders.

“Most of the consumption of poor families are VAT exempt such as agriculture food products,” the Finance chief said.

The influential CBCP on Monday urged the government to review the 12-percent VAT on oil and to look into the possibility of lifting the Oil Deregulation Law to help Filipinos cope with soaring oil and food prices. Inflation rose to 14-year high in June of 11.4 percent.

“We respect their advice as far as religion and morals are concerned but when it comes to economic and taxation issues they should not interfere,” Finance Undersecretary Gil Beltran said.

But Teves said he is open to discussing the matter further with the CBCP.

“We would welcome the opportunity to discuss with CBCP our position on the issue and work with them in looking for ways to alleviate the impact of rising oil and food prices on our people, especially the poor,” he said.

The latest to join the anti-EVAT chorus was former President Joseph Estrada.

“Repealing the EVAT on oil and power will have a domino effect. Every time oil prices increase, the prices of basic commodities also increase. So I believe that repealing the EVAT on oil and power will compel retailers and wholesalers of basic commodities to reduce their prices,” Estrada told The STAR in a phone interview.

As of end-May, the government was able to contain the budget deficit at P18.8 billion as total revenues for the period amounted to P482.4 billion against expenditures of P501.2 billion. The figure is still better than the P41.8-billion deficit posted in the same period last year.

In May alone, the government posted a budget surplus of P7 billion, its highest May surplus since 1986, due largely to improvement in tax collection and lower spending. This is a marked turnaround from the P1.7-billion deficit posted in the same month last year.

Cap on oil EVAT

Instead of suspending or scrapping the expanded value added tax on oil as demanded by some sectors including Catholic bishops, the government should limit it to P7 per liter or just enough to keep fuel prices from rising further, Speaker Prospero Nograles said yesterday.

“This should protect our consumers from anticipated increase of pump prices which is expected to ultimately go to P10 as per oil industry estimates. The way to cushion impact is not to remove but to put a limit to VAT on oil,” Nograles said.

Imposing a P7 ceiling per liter, according to the Speaker, “means that all future oil price adjustments will be VAT free and the present rate of gas and oil will stay despite price adjustments.”

Nograles directed Antique Rep. Exequiel Javier, chairman of the House ways and means committee, to “prioritize and expedite the approval of this proposal.” The Speaker said his proposal is a “win-win formula.”

“Let’s not remove the EVAT on oil. It’s a popular preposition but it’s deadly to the economy,” he said. “At most, what we should do is to fix the rate of EVAT on oil at P7 per liter maximum.”

He stressed that removing the VAT on oil even on a temporary basis “can do more harm than good.”

“A middle-ground can be achieved by fixing the EVAT on oil at P7 per liter maximum,” he said.

Nograles also urged the Department of Agriculture to work double-time to improve significantly the country’s food production capacity.

“We may not have oil but if we have food, our country will survive heads above water,” Nograles said.

Energy conservation

Three administration congressmen are pushing for a four-day workweek scheme for private and government offices as part of an energy conservation program. The three also want limited mall hours as part of the program.

Bulacan Rep. Reylina Nicolas, a member of the House committee on energy, said the four-day workweek scheme “deserves serious study” as oil companies plan to raise the prices of petroleum products by at least P10 per liter next month.

“Some business and economic analysts even warned that the price of diesel may reach P72.43 per liter before the year ends,” she said. “Since we don’t have control over the soaring pump prices, the practicable thing to do is to conserve electricity and fuel.”

Bohol Rep. Adam Relson Jala said a four-day workweek is a “timely and realistic proposal because of the unabated oil price hikes that have burdened the people.”

“The four-day workweek will not only mean daily savings for government but also for employees. Millions of pesos will be saved through this scheme, it’s time other offices tried it,” Jala, chairman of the House committee on government enterprises and privatization, said.

“The public should understand that everyone has a responsibility to help the nation during these hard times,” he said.

Rep. Marcelino Teodoro, for his part, urged his colleagues to adopt House Resolution No. 629 imposing a four-day workweek scheme on government institutions.

“The compressed work schedule has been implemented in the past in some government agencies, including the House of Representatives,” Teodoro said.

Teodoro said the scheme will require government employees to work up to 10 hours a day for four days a week.

“Employees would still be working the same 40 hours per week – the work duration per week required of those in government service,” Teodoro said.

Other measures needed

Sen. Francis Escudero, chairman of the Senate ways and means committee, said aside from lifting the VAT on oil, the government needs to do more to help the people cope with rising prices.

Escudero said the steady rise in the prices of goods could negate the benefits of the tax exemption law for minimum wage earners that took effect yesterday as well as the 10-percent increase in the salary of state workers that would take effect this month.

The tax exemption law grants P14 billion in additional spending power to low-income earners.

The 10-percent salary hike for 1.4-million state workers will initially cost government P12 billion this year.

Minimum wage private sector workers in 16 of 17 regions, except the Autonomous Region in Muslim Mindanao, already received “their token pay hikes” last month, following President Arroyo’s Labor Day directive to regional wage boards to fast-track the grant of pay adjustments.

Escudero said the government should see to it that wages that should have been remitted as taxes stay in the pay envelopes of the minimum wage earners.

“While to her credit, she has ordered three wage hikes in the past 30 months, each, however, was a one-time only initiative when a comprehensive compensation program is what is needed,” he said

Escudero also said the government should make good its promise of the “food, fuel, tuition” subsidy for the “ultra poor” because “collectively these can act as salary extenders, a safety net in these hard times.”

He said the June inflation picture showed an across-the-board increase in the prices of goods “taken at a time when high oil prices like a powerful storm have yet to make a landfall.”

Sen. Manuel Roxas II, chairman of the Senate trade and commerce committee, said the senators had done their part in looking for ways to ease the people’s burden and would now just have to keep urging the Palace to signal to the House, where all tax measures emanate, to make the move.

“We know that in the House, the signal from Malacañang is what is followed,” he said. Administration allies dominate the House of Representatives. – Paolo Romero, Iris Gonzales, Delon Porcalla, Aurea Calica, and Jose Rodel Clapano

Chief News Editor: Sol Jose Vanzi

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