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Government loses some P16 billion in foregone tax
revenues a year because of rampant oil smuggling, Sen. Francis
Escudero said, citing data presented at a Senate hearing Wednesday.
Escudero is chairman of the
Senate Committee on Ways and Means, which conducted the hearing on
the proposed measure to suspend the 12-percent value-added tax (VAT)
on petroleum products. The proposal is aimed at softening the impact
of soaring world oil prices on Filipino consumers.
The Department of Energy reports
that some 12 billion liters of oil are consumed in the Philippines
annually, contradicting reports from the Bureau of Internal Revenue
(BIR) that show consumption is only 8 billion liters every year,
Escudero said. The BIR figure is the one subject to tax.
The difference—about 4 billion
liters—is likely from smuggling and costs the government some P16
billion in foregone revenues, Escudero explained.
Critics of the Senate measures
suspending, and eventually eliminating, VAT on oil products have
said the government should improve tax collection instead.
Finance Secretary Margarito Teves
said government stands to lose P54 billion if VAT on oil is
suspended.
Earlier, the International
Monetary Fund (IMF) representative in the Philippines also
criticized the VAT-suspension measure, saying it could harm the
poor. He added that wealthy people, who are the main consumers of
oil, stand to gain the most.
To the help the poor, the IMF
representative said, government should instead increase spending on
social services.
President Gloria Arroyo earlier
announced a 1-percent cut in the oil tariff to ease consumers’
burden from the expensive oil prices. As a result, diesel prices are
expected to go down.
VAT or bust
Still, Escudero is bent on
pushing the VAT suspension, saying the doomsday scenario that
critics are portraying will not materialize.
He belittled President Arroyo’s
oil tariff cut, saying that will have an imperceptible impact on
fuel pump prices.
Sen. Mar Roxas 2nd, the main
proponent of the scrapping of VAT on oil, said government should not
be afraid of his proposal. The money saved by oil consumers is
likely to be spent on other goods and services, which are subject to
tax—and thus, goes to government coffers.
Roxas added that the proposal to
suspend VAT on oil is not an end in itself, as it is part of his
two-step approach to address poverty. The first step is to provide
relief to the poor, and second is a massive and focused investment
in education and public health.
--Sammy Martin
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