Tap excess taxes on imported oil to offset power costs — Nograles

05/22/2008

The House leadership yesterday asked the government to use the estimated P16.7-billion expanded value-added tax (e-VAT) collection on imported oil in order to subsidize the power and fuel consumption of the consumers.

Speaker Prospero Nograles presented this alternative which, he said, is more doable and more practical than his previous proposal to remove e-VAT from residential users with P5,000 or less in electric bills as it will not disturb the government’s fiscal projections.

Based on a study conducted by the Congressional Planning and Budget Department (CPBD), the government will raise an estimated P16.7 billion in tax windfall from its e-VAT collection because of the high cost of Dubai oil.

“This P16.7 billion in extra tax collection from e-VAT should be used to subsidize fuel and electricity for our people. If it’s not feasible to lift the e-VAT on power for residential users because this might cripple the economy, providing subsidy by tapping the government’s tax windfall is the quickest and most practical solution to provide relief for our countrymen,” he said.

“The budget assumption on Dubai oil for 2008 was at the level of $70/barrel, with projected VAT collection of P44 billion. But Dubai oil is now $115.23 per barrel and the VAT intake could now reach the P60.7-billion level. This means that the government earned P16.7

billion extra from VAT for Dubai oil alone,” he added.

Government financial managers use Dubai oil, among other “predictable tax intakes,” as one of its parameters in making revenue assumptions.

Nograles earlier urged the House committee on energy to fast-track a study on a proposal to temporarily suspend the eVAT on the electric bills of residential consumers paying P5,000 or less and find out its impact on the economy.

But amid warnings that this proposal will severely disturb existing fiscal projections of the government, the Speaker tasked the CPBD to look into other alternative mechanisms to cushion the impact of the worldwide economic crunch.

“Whichever will bring the best benefits for the people and the economy, we will go for it. What is paramount is to give relief to our people without resulting in long-term economic dislocation,” he said.

Based on the CPBD study, a previous Senate proposal to scrap the 12-percent VAT on oil products could be “counterproductive because it will permanently reduce the tax base of the government.”

“There will be an estimated revenue loss of P51 billion on oil alone. Moreover, shelving the 12 percent VAT on fuel may be difficult and may take a long time to implement because it will require a legislative action by amending the Reformed VAT Law or Republic Act 9337, which may even face veto from the President.”

Upon the recommendation of the CPBD, the Speaker said the P16.7 billion tax windfall from Dubai oil can be “re-channeled toward subsidizing the public’s electricity and fuel consumption.”

The breakdown of the proposed subsidy are as follows: P6.5 billion for households using 500 KWH and below at P1/KWH subsidy; P8.3 billion for diesel fuel at P1.30/liter subsidy; and P1.9 billion for liquefied petroleum gas (LPG) at P1/liter, for a total of P16.7 billion.

Based on estimates, 96 percent of residential power users have 500 KWH and less in monthly energy consumption.

Gerry Baldo and Charlie V. Manalo

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