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VAT suspension on fuel to benefit rich — DoF

By Ruben Hortelano

05/13/2008

Proposals to suspend or repeal the 12-percent value-added tax (VAT) on fuel is expected to help the rich more than majority of the Filipinos, Finance Secretary Margarito Teves said yesterday.

The government is also expected to forego as much as P46 billion in revenues if the VAT is suspended, Teves said.

The P46 billion represented actual VAT collection from oil last year.

The government’s Family Income and Expenditure Survey showed 41.3 percent or P18.9 billion of the benefits from suspension will accrue to families that earn P100,000 up to P249,999 a year.

Also, 40.7 percent of the benefits of suspension or P18.6 billion, will accrue to income groups earning P250,000 and above.

In a position paper, Teves said the suspension of the VAT on oil will bring only “minimal” benefits to the lowest income groups.

For income groups earning P20,000 or lower in a year, only P45.7 million or 0.1 percent of the benefits will accrue to them.

For those with annual earnings ranging from P19,999 to P39,999, only P686 million or 1.5 percent of the benefits have relevance to them.

Those earning 60,000 up to P99,999, only 12.4 percent or P5.667 billion will accrue to them.

He also said families earning P61,545 a year, which represents the poverty threshhold in 2003, also enjoy similarly “minimal” benefits from the suspension equal to only 6 percent of total taxes suspended or only P2.7 billion of the P46 billion that will be lost.

In addition, jeepney fares will go down by only 24 centavos if the 12-percent VAT were suspended, hardly the significant dent sought fron existing minimum fare of P7.50 at the moment, Teves said.

Finance Undersecretary Gil Beltran, who heads fiscal planning, said the P46 billion will have to be obtained from somewhere if the VAT revenues from oil were to be abrogated or suspended.

This was P46 billion that had to be borrowed from somewhere, possibly locally or even from overseas lenders.

Without that P46 billion, revenue flows will suffer and likely impact on the country’s credit standing and very possibly force the rating agencies to downgrade the country’s credit stature, Beltran said.

And most of all, the lost revenue translates to deficit of P46 billion this year given that the VAT on oil was an important factor in setting this year’s fiscal programming, Beltran said.