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By Chino S. Leyco Reporter
HEEDING proposals of exempting
oil products from the value-added tax (VAT) will redound to a
substantial reduction in government revenues for the year, the
Department of Finance warned Wednesday.
Finance Secretary Margarito B.
Teves said the department expects foregone revenues would rise to
P54 billion, or P14 billion more than last year’s estimate, should
oil products be exempted from the sales tax.
The amount would allow the
government to plug more than three times over the expected
P15-billion budget deficit for last year.
“I think the objective is good,
except that it has [a] compensation. It used to be P40 billion last
year. It increased because the prices have changed,” Teves told
reporters.
Instead of eliminating the VAT on
oil products, the finance chief said the three-percent duty on crude
oil will be cut to two, with the trigger price of $81 a barrel, and
may further be reduced to one percent “if crude oil prices stay at
$92.41 a barrel.”
“As of the first week of
January, it was [at] $93.28,” he added.
Teves also said the price of
diesel is expected to drop before the end of the month following the
announcement of the cut in the tariff.
The transport sector can expect a
P0.43 reduction in the price of diesel, he said, adding the
government decided to focus on the most affected sector.
“If it’s across the board
even the rich can benefit in it,” he said.
The finance secretary said an
across-the-board reduction would cut prices at the pump by P0.23 to
P0.25 a liter.
Teves said the government has yet
to decide on the mechanism of the tariff cut, but assured the scheme
will be revenue-neutral since the duty is computed on the value of
the item—which means that high oil prices allow a lower rate of
duty without sacrificing the revenue collection target.
The government implemented a
similar scheme in 2005, but the price thresholds or triggers were
lower.
A two-percent tariff was imposed
on imports when the two-week average price of Dubai crude hit $66 a
barrel and the Mean of Platts Singapore-based diesel reached $88 a
barrel.
The tariff was further reduced to
one percent when Dubai crude reached a two-week average of $75 a
barrel and diesel, $88 a barrel. The tariff was reduced to zero when
Dubai crude reached $85 a barrel, and diesel, $88 a barrel.
The tariff was restored after
prices eased.
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