P-Noy thumbs down proposal to cut oil VAT by half

Published by rudy Date posted on April 5, 2011

MANILA, Philippines – President Aquino rejected yesterday proposals by his party-mates in the Liberal Party (LP) to reduce the value-added tax (VAT) on oil.

LP members in the House of Representatives are pushing for House Bill 1970 filed by Batangas Rep. Hermilando Mandanas seeking the reduction of the 12 percent VAT on oil by half or to six percent.

The bill aims to temper the rise in fuel prices as well as its impact on consumer prices.

“As I said, it (VAT reduction) will only increase fuel consumption. It’s useless. It will also deprive us of revenues that we can use for the country’s various needs,” Aquino said in Filipino in a chance interview.

Mandanas is chairman of the House committee on ways and means.

“If we cut it (VAT), it may sound nice, but at the end of the day, it’s still our directed focus on transport assistance that can best help us address the skyrocketing of crude prices,” he added.

Providing fuel subsidy to jeepney and tricycle operators is the most “direct assistance” the government can give to public utility drivers, to keep them from raising fares.

“Commuters will be directly affected by rise in fares if we don’t implement this (subsidy). The effect of reducing or removing VAT is undirected,” he said.

President Aquino and his economic managers, particularly Finance Secretary Cesar Purisima, have promised not to impose new taxes so as not to further burden the public. They also promised to plug tax leaks and improve collection.

Mandanas said his proposal would “lower direct VAT payments of consumers, eliminate the corruption-laden input tax credit deductions and increase by P50 billion the government’s VAT collections.”

He said his VAT reduction bill is also consistent with the President’s appeal for lawmakers to desist from imposing new taxes.

Under the Mandanas bill, the VAT would be reduced to six percent but would be applied to all manufacturers, wholesalers, traders, retailers of products and services, and end-users.

He lamented that under the present system, only end-users or buyers of products and services shoulder the 12-percent VAT.

Businessmen and other merchants involved in the production, distribution and sale of products and services do not pay VAT because the law entitles them to what Mandanas calls “input tax credit deductions.”

For instance, Mandanas said, owners of malls and supermarkets can claim part of their infrastructure, security and electricity costs as deductions.

Because of these deductibles, the government, in many cases, ends up having financial obligations with mall and supermarket owners and other businessmen.

For his part, Quezon Rep. Danilo Suarez said he would continue to push for the restructuring of excise taxes on cigarettes and liquor, or the so-called “sin” products.

He said tax rates on these products have been fixed since 2004, and the small adjustment the law allows is not even enough to cover inflation.

The Mandanas committee is still considering the Suarez proposal and similar measures introduced by several House members, including Reps. Henedina Abad of Batanes and Niel Tupas Jr. of Iloilo.

Mandanas, Abad and Tupas are LP members while Suarez belongs to the minority.

Suarez lamented that administration allies are sitting on tax proposals despite the fact that the government badly needs additional revenues.

Expanded fuel subsidy

The government is also studying proposals to include farmers and fisherfolk in the fuel subsidy program.

Aquino said a careful study is needed because unlike jeepney and tricycle operators who are documented, there is no official database for farmers and fisherfolk.

“There have been proposals. We will look into them. Fisherfolk, for instance, seem to be worthy. The issue here is, in the case of transport there is franchise – more or less we can be sure where the funds are going,” he said.

“The same is true with fishermen. I’m not that sure how thorough the coverage of the Coast Guard is with regards to registration,” he added.

Ricky Carandang, one of the presidential spokesmen, earlier admitted that providing fuel subsidy to transport groups is merely a stop-gap measure to help jeepney and tricycle operators and drivers cope with the rising cost of fuel brought about by hostilities in the Middle East and North Africa.

“We never meant this to be sustainable. But given the high fuel prices and given the possible impact that this will have on ordinary people, we felt that we had to take some action,” Carandang said.

“We are studying longer-term actions which I’m not at liberty to reveal right now with regard to dealing with the volatility in fuel prices. But, yes, it is a temporary solution. We don’t say this is a permanent solution,” he said.

He said the Departments of Energy and of Budget and Management would thresh out details of the program upon consultation with the Land Transportation Franchising and Regulatory Board.

“We don’t know what the exact numbers will be at this point. DBM has to get back to us and tell us how much of the savings that we’re generating can be used for these subsidies. There are estimates of between P400 and P500 million,” he said. –(The Philippine Star)

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