Measures vs price hikes all ‘short-term’ — Diokno

Published by rudy Date posted on April 8, 2011

The measures being taken by President Aquino to address rising prices have short-term effects and may even encourage corrupt practices, according to noted economist University of the Philippines (UP) professor Benjamin Diokno.

Aquino the other day directed economic officials in the Cabinet to study the possible imple-mentation of a wage increase for private employees, a reduction of the value added tax (VAT) on fuel and the imposition of price controls on basic com-modities which was seen as a move to shore up his falling survey ratings.

Diokno, who was also a former Budget Secretary, said the government should look for long-term solution to rising prices and that price control won’t work except for a very short period.

He said control on fuel prices will not work since rising energy prices won’t go away soon. “Also price control will strain a weak bureaucracy, both at national and local levels and might even give rise to corruption,” he said.

He recommended that the government pursue an amendment in the taxation of oil and oil products where there would be a ceiling and a floor price on fuel to guide taxes.

“Once world oil prices hit the ceiling, VAT rate should be cut from 12 to 10 percent; when it hits the floor rate, the rate should be adjusted to 14 percent,” he said.

As a result of surging prices of oil, the government is earning windfalls from the many taxes imposed on fuel. Tax makes up about half of the current retail prices of fuel.

Diokno said the government should not benefit through windfall taxes on fuel as the general public suffers as a consequence.

“With an automatic cut in taxes, users benefit in proportion to their use of oil products,” he said of his proposal.

Diokno also branded the coupon system, or what the government

calls as smart discount cards, is discriminatory and requires additional administrative costs to implement, and creates opportunities for rent seeking, or gains obtained by fuel firms from government subsidies.

The Department of Energy (DOE) said it will start issuing on May 1 the “Pantawid Pasada” smart cards which will provide much-needed relief to the transport sector amid the spiraling oil prices worldwide.

Energy Secretary Jose Rene Almendras said the smart cards will carry a load of P1,050 per card and will be issued to 268,245 public utility jeepney (PUJ) franchise holders nationwide.

“This is a card that they can use for fuel; they can use it one time, it’s up to them,” he said.

A joint task force composed of the Land Transportation Office, Land Transportation Franchising and Regulatory Board and the DOE will be tasked to ensure the smooth distribution of the cards, Almendras said.

The Energy chief urged the card holders not to discard the card because it can be used to avail of the P1.50 per liter discount in the transport lane of the oil companies.

Almendras said buses were not included in the assistance program because they were already granted authority to increase their fare and at the same time they have fuel stations inside their terminals, which meant that the buses are already availing of lower-priced fuel.

He said the government is now in discussions with the credit card companies and the banks for the mechanics of the smart card.

The official said the smart card is “reloadable” in the event that government decides to provide another round of assistance.

“We can reload at any time, if the prices go up again, and if we have the resources, we can load the card again. It depends on price of fuel and availability of funds,” he said.

The assistance program is estimated to cost the government P450 million.

Aquino, meanwhile, said his administration will continue to reach out to groups from the transport sector who have been critical of the executive order granting assistance to jeepneys and tricycles in order to mitigate the impact of high oil prices.

Aquino issued Executive Order 32 this week authorizing the release of the P450 million assistance to jeepney and tricycle drivers.

However, the Pagkakaisa ng Samahan ng Tsuper at Opereytor Nationwide (Piston), one of the groups of jeepney operators in the country, opposed the issuance of the order.

Piston argued that scrapping the VAT imposed on petroleum products will be more effective in easing the burden of the transport brought about by the continuing rise in fuel prices.

Presidential spokesman Edwin Lacierda said in the press conference on Thursday at Malacanang said the government “will continue to explain (the President’s move to grant subsidy) because it is the responsibility of the government. We will not hesitate and stop in explaining our position and hoping that we will try to address the concerns of our people.”

Dialogs between the government and groups from the transport sector have been continuing, Lacierda said. He added that Energy Secretary Rene Almendras regularly monitors the global oil prices and comes up with commutations and shares it with the transport sector.

“He (Almendras) continues to explain about the increase of oil in the world market. He shows it to the members of the transport industry, the increases in the oil price. And like what you said it is a global phenomenon,” Lacierda said.

Although Piston’s leadership rejected the assistance, Lacierda said he believes members of the group will accept the support being offered by the government because it could help them ease the burden of high fuel price.

“We believe that even they rejected it as a matter of policy, but individual members of Piston certainly would avail the assistance program of the government,” he said. -Chito Lozada, Daily Tribune

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