Junk VAT on fuels to soften food prices – ex-lawmaker

Junking the 12 percent expanded value-added tax on refined fuels can bring down pump prices and soften prices of foodstuffs and other prime commodities towed upwards by skyrocketing fuel costs.

As he pointed out that sky-high fuel prices may have hauled down public satisfaction with the performance of President Benigno Aquino 3rd, a former senator urged Congress to scrap the value-added tax (VAT) on petroleum products, saying the extra levy “has become too harsh on consumers, and a distasteful boon for government.”

Former Sen. Juan Miguel “Migz” Zubiri warned that excessive fuel prices, partly due to the 12 percent VAT, have put tremendous upward pressure on the costs of other basic commodities, including rice.

“For instance, the price of locally produced, good-quality rice that used to sell for only P41 per kilo has started to move up to as much as P44,” Zubiri said.

“The problem with the VAT is that it is extremely buoyant. As fuel prices rise, government’s add-on 12 percent VAT take also automatically increases, thus further elevating pump prices to the detriment of consumers,” he said.

“Due to rising fuel prices, government has been raking in obscene windfalls from the VAT to the gross disadvantage of ordinary Filipinos,” Zubiri pointed out.

The VAT on petroleum products, which is on top of import duties and excise taxes, has become overly burdensome to consumers, he added.

Despite lower volumes, the total value of the country’s oil imports hit $12.57 billion in 2011, up 26 percent from $9.96 billion in 2010. The large increase was due to higher oil prices.

Zubiri said the figures implied that government’s VAT collection from petroleum products also went up by a corresponding 26 percent last year.

In his Senate stint, Zubiri introduced Senate Bill 1977, which sought to exempt petroleum products (as well as electricity) from the VAT.

Congress has to decide whether to eliminate the VAT on fuel and put some of the tax money back in the pockets of consumers, or to retain the extra impost and keep the money in the National Treasury, he said.

“Our sense is, the money is better put back in the pockets of consumers, for them to spend, to enable them to cope with soaring commodity prices,” Zubiri said.

Besides, he said consumers tend to spend money more efficiently than government.

“Congress should be fair and sympathetic to ordinary Filipinos reeling from the high cost of living,” Zubiri said.

The former senator from Mindanao said the removal of the VAT on oil would provide “instant and tangible economic relief” to consumers. –Manila Times