Aquino urged to cut EVAT on oil products by half

MANILA, Philippines – If President Aquino does not want to suspend the 12-percent value added tax (VAT) on oil products, he should at least cut it by half while gasoline prices are high.

Cagayan de Oro City Rep. Rufus Rodriguez made the suggestion yesterday in reaction to the President’s statement that suspending VAT on petroleum products would result in a bigger budget deficit and would do more harm than good to consumers.

Another congressman, Ben Evardone of Eastern Samar, urged the President to use the government’s interest payment savings to subsidize petroleum products.

Evardone said Congress has appropriated P357.1 billion in the 2011 national budget for interest payments on foreign debt based on an exchange rate of P48 to a US dollar.

“Since the rate is now hovering between P43 and P44 to the dollar, the government will have substantial savings, which it could use to subsidize oil while there is crisis in the Middle East and North Africa,” he said.

He said the administration should explore all measures that could mitigate oil price increases and ease the suffering inflicted on the people.

Rodriguez is one of several lawmakers who have proposed that the government temporarily stop collecting VAT on oil while there is turmoil in the Middle East and North Africa and while fuel prices are high. Another is Sen. Ralph Recto, the principal author of the expanded VAT law.

The Mindanao congressman and his brother Maximo, who represents the party-list group Abante Mindanao, have filed House Bill 4309, which seeks the suspension of VAT on fuel when crude oil prices hit $80 per barrel.

Crude prices have already breached the $100-per-barrel level.

Rodriguez said President Aquino should agree to some form of relief to help people cope with difficulties caused by higher fuel and consumer prices.

He said while he is for halting VAT temporarily when the world market price of crude oil hits $80 per barrel, he is open to several formulas for cushioning the impact of high oil prices on the public.

“For instance, we can cut the 12-percent VAT by half when the price of crude reaches $90 or $100 per barrel and suspend it altogether at a certain higher price,” he said.

He added that if the President’s figures are correct – that suspending VAT on oil would mean foregone revenues of P5 billion a year – then the impact of a temporary 50-percent VAT reduction on state coffers would just be minimal.

Big relief

“On the other hand, it will be a big relief for motorists and the public in general. It would ease the pressure for an increase in transport fares and similar adjustments in the prices of consumer products,” he stressed.

Taking the widely used diesel as an example, Rodriguez pointed out that if the base price of the product before VAT is P40 per liter, VAT would amount to P4.80.

“If we cut the levy by half, the public will enjoy a reduction of P2.40 per liter of diesel. The benefit will not be limited to drivers of public utility vehicles. All of those using diesel, including ordinary employees, will enjoy the reduction,” he said.

“The reduction will just be temporary. The full VAT will be restored once the situation and crude prices normalize,” he said.

Rodriguez said the government apparently accepts the fact that it is in a situation where it should give some form of relief to consumers.

He noted news reports quoting Finance Undersecretary Gil Beltran that Finance Secretary Cesar Purisima, before he joined President Aquino’s state visits to Indonesia and Singapore, had asked him to study possible relief measures other than suspending or reducing VAT.

‘Submit bill’

He said if the President is agreeable to cutting VAT on fuel by half, the fastest way to effect the reduction is for Malacañang to submit a certified bill to Congress.

“We in the House and the Senate can expedite its approval. We can have the amendatory law passed before we go on our Lenten break later this month,” he said.

Before flying home from Singapore, President Aquino said that while he knows that suspending VAT would increase the budget deficit, it was not clear to him if it would really benefit a greater number of Filipinos.

“What I’m saying is, will the public benefit from this? It will make me look good, but what will be its consequence? It’s not clear to me that suspending VAT would benefit everybody,” he said.

Besides, he said it would encourage wasteful use of petroleum products.

“Artificially maintaining lower fuel prices would only discourage people from changing their habits of using fuel and save less…if you reduce pump prices, some might say, ‘it is cheaper now, let us use more’, and the problem will even become bigger. We are not getting any solution,” he said. –Jess Diaz (The Philippine Star)