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THE
government is looking at an P18.6-billion windfall—or
more than the P16-billion to P17-billion earlier
estimates—from the 12-percent value-added tax (VAT) on
oil, largely due to the skyrocketing cost of imported
crude in the world market, finance officials informed
members of a congressional oversight panel Monday.
Sen.
Francis Escudero, cochairman of the Senate-House
oversight committee on the Comprehensive Tax Reform
Program (CTRP), noted that the P18-billion windfall from
VAT on oil imports alone is “on top of the target
revenue that the Department of Finance [DOF] projected
when it pegged the price of crude oil per barrel at
between $62 to $70 for this year.”
Confirmation of the windfall came as lawmakers offered
more options on how best to use the VAT windfall to ease
the impact of soaring fuel and food prices on people
without heeding a persistent call from some senators to
suspend or scrap the VAT on petroleum products. The
finance department, tasked to review the options, had
earlier signaled it is amenable to using the windfall
for propoor measures, but stressed that the Executive
cannot do any of these measures if Congress removes the
VAT.
On top
of an earlier proposal by House Speaker Prospero
Nograles, another use for the VAT windfall was raised
Monday by a party-list congressman: Use the money to get
back Petron to give the government leverage in
influencing prices in the long term.
Arguing
that while he acknowledged the good intention of the
suggestion to use the windfall tax to give some relief
to consumers from high prices, such use is just a
“one-shot deal,” compared with the long-term value of
reacquiring Petron, according to Rep. Teodoro Casiño of
Bayan Muna.
In a
statement, he said regaining control of former
state-owned Petron Corp. gives the “government enough
market leverage to lower domestic oil prices and check
the monopolistic and abusive practices of foreign oil
firms.”
The
board of the Philippine National Oil Co. (PNOC) recently
gave clearance for government’s Petron partner, Saudi
Aramco, to sell its 40-percent stake to British
investment fund group Ashmore. Critics argued that with
Aramco disposing of its stake, the argument that selling
the government’s 40-percent stake to the Saudis as a
strategic move has collapsed; hence the renewed clamor
for Manila to retake that stake. However, finance
officials had said earlier the state did not have the
wherewithal for such.
According to Casiño, a subsidiary of Ashmore recently
made a $550-million offer for Aramco’s stake in Petron
Corp. The Saudi government-owned company bought its
Petron stake for about $530 million in 1994.
“The
fact that Aramco’s stake is up for sale gives us a
golden opportunity to correct the mistake of selling
Petron. In fact, only a part of the P16.7 billion is
needed to get back a majority control of Petron. All
government needs is to reacquire another 11 percent of
Petron’s shares on top of the PNOC’s 40-percent stake to
gain the majority in the oil firm,” said Casiño.
Meanwhile, yet another option for the use of part of the
VAT windfall came from Sen. Pia Cayetano. She insisted
that health services should get at least 10 percent from
the reported P18-billion incremental revenues from VAT
this year because this is already in the law.
“The
first thing to be done is to implement the expanded
value-added tax law [Republic Act 9337] which requires
under Section 21 amending Section 288 of the National
Internal Revenue Code that allocates 10 percent of
incremental revenues from E-VAT should be allocated for
health insurance premiums of enrolled indigents,” she
said.
She
agreed with the proposal by Speaker Prospero Nograles to
use the incremental funds from VAT on petroleum to
subsidize the electricity and fuel consumption of
consumers, but added “this is not enough.”
A “more
direct intervention to benefit the people” is setting
aside part of these funds for basic health services, she
said—by improving facilities, increasing medical staff
and ensuring the supply of medicines and other basic
provisions in public hospitals and community health
centers.
In
estimating the VAT windfall for 2008, Escudero recalled
that the oil price projections, since overtaken by
surging oil prices now hovering at over $130 per barrel,
were part of the budget documents submitted to Congress
last year. “That’s only for oil. Their assumptions were
at $62 to $70 per barrel at the exchange rate of P46-P48
to a dollar. It’s clear that these were wrong, hence the
windfall. The dollar is weaker and oil is more
expensive.”
A
Congressional Planning and Budget Department study
earlier showed the government stands to gain a windfall
or additional P16.7 billion from E-VAT as a result of
the increased price of Dubai oil.
Escudero
estimated that at 12-percent VAT of P40 per liter of
gasoline at the pump, the VAT would add up to P4.80 per
liter. “At P52 per liter, that goes up to something like
P6.24; so, while the price rises, government revenue
increases since it’s a percentage tax. So, there’s a
windfall [revenue] and if this goes on, that’s P18.6
billion.”
The
irony, he said, is that it’s a windfall profit where
even the government “benefits” from soaring oil prices,
and thinks this is unconscionable. He invited attention
to tariff, which is adjusted downward while prices rise,
so it becomes zero or revenue-neutral.
“Which
is why we in the Senate ways and means committee are
pushing for three options on the VAT: removal,
suspension or reduction with the view to equalize it,
just like the tariff, meaning if oil prices increase
they can forgo with the additional tariff, or authorize
the President to do so.
“A third
option is to use the windfall oil revenue to establish a
fund similar to OPSF [Oil Price Stabilization Fund] that
can absorb the spikes.
This
developed as only Sen. Juan Ponce Enrile agreed with the
reported assertions made by Teves that only the rich
would benefit if the VAT is scrapped at this time.
Several senators debunked the finance secretary’s claim.
“I agree
with Secretary Teves that if the VAT on oil [estimated
to bring in P54 billion in revenue] is lifted, it will
lessen collections” and affect delivery of vital
government services, as well as its infrastructure
programs like road networks, bridges, etc.,” Enrile
said. He suggested, however, that Teves consider paring
down the VAT on power from 12 percent to 2 percent to
help bring down consumers’ electric bills.
Senate
Minority Leader Aquilino Pimentel Jr. disputed Teves’s
claim that only rich people will benefit from removal of
the VAT, noting that both rich and poor people are
paying the tax when they avail of goods and services.
“Tax laws should be progressive,” said Pimentel.
Sen.
Loren Legarda dared Teves to take away the VAT from food
and other consumer products. “If the VAT is not lifted,
there should be other ways government can immediately
adopt to mitigate the additional burden imposed on
consumers by rising prices of oil and power,” Legarda
added.
Sen. Mar
Roxas II, who has been calling for scrapping the VAT on
oil, complained that the argument of Secretary Teves
(about the rich being the only beneficiaries of lifting
the Vat on oil) is “not rooted in reality.”
Escudero
added that Teves, in raising the argument that VAT
lifting favors only the rich, was “assuming that we are
talking only of automobiles. But we are talking of oil
products with a multiplier effect. Almost all consumer
goods use oil and fuel as part of cost of production.”
At the
same time, Sen. Miriam Santiago, cochairman of the Joint
Congressional Power Commission (Powercom), instructed
Energy Regulatory Commission (ERC) chief Rodolfo Albano
to take immediate steps to bring down consumers’
electric bills.
While
conceding that the Powercom has no power to issue orders
to the ERC, Santiago argued in a privileged speech that
the Epira law gives Powercom the function of issuing
guidelines to the ERC, as well as monitor and ensure
implementation of the Epira, which was intended to lower
power rates.
The DOF
said it prefers measures to mitigate high oil and food
prices, rather than totally suspending VAT on oil, as
this may cause billions of forgone revenues to the
national government and only benefit higher-income
families.
In a
statement, Teves said that based on their simulations,
it would cost the government some P73.1 billion in
forgone revenues if the VAT on oil was suspended.
“Suspending the VAT on oil would mean that those who can
afford to pay higher oil price, like those with luxury
cars and other gas-guzzlers, would benefit more and that
would not be equitable,” Teves said.
He added
that the DOF prefers oil subsidies to public utility
vehicles, such as the P2 per liter discounts given to
the jeepney drivers, and food subsidies to poor
families.
The DOF
would also ask several government financial
institutions, such as the Development Bank of the
Philippines, to provide loans to jeepney drivers and
operators to convert their engines from using diesel to
cooking gas, which it said is cheaper.
Teves,
however, warned that his agency could not do anything if
Congress decides on suspending the VAT on oil.
Earlier,
the government implemented a tariff-reduction scheme to
mitigate the impact of world oil prices, which already
peaked at $135 per barrel. By June 1, oil tariffs would
have gone down to zero, which will also impact on the
Bureau of Customs’ collection goal for the year.
Legislators, however, said the tariff reduction is not
enough to help consumers, which was where the issue on
scrapping VAT on petroleum and petroleum products and
also on power is coming from.
A bill
has been filed in both chambers of Congress, led by
militant legislators at the House of Representatives, to
suspend the 12-percent VAT on oil. (With VG Cabuag) |
