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Palace insists on oil tax, Bill seeks P2/liter levy hike to raise P29.7B
Carlito Pablo, Inquirer News Service, Agence France-Presse (Updated 11:54pm (Mla time) 08 Aug 2004); With a report from Agence France-Presse (First posted 9:37 AM)

Editor's Note: Published on page A1 of the August 9, 2004 issue of the Philippine Daily Inquirer

PHILIPPINES: AS IF spiraling world oil prices were not enough, Filipino consumers are being asked to "bite the bullet" and bear new taxes on petroleum products.

Rep. Joey Salceda (Lakas-Kampi, Albay), in-house economist of the House of Representatives, said an administration-backed measure was seeking a P2 per liter increase in taxes on petroleum products.

Salceda said the petroleum tax, as embodied in House Bill No. 1323, would be the biggest single source of revenue among the eight tax measures that President Macapagal-Arroyo is asking Congress to pass.

If enacted into law, the measure would generate P29.7 billion for the cash-strapped administration, according to Salceda. HB 1323 is authored by Rep. Danilo Suarez (LP, Quezon).

"Clearly, the petroleum tax offers the most substantial potential as a source of recurring revenue flow," Salceda said in a study.

The second biggest source would be the indexation of taxes for "sin products," such as tobacco and alcohol-based drinks. It is expected to bring in P14 billion.

The other tax measures that Malacañang is pushing involve shifting from net income to gross income taxation, repealing the value-added tax system, taxing windfall profits of telecommunications firms, rationalizing fiscal incentives, instituting a targeted tax amnesty, and creating a performance-driven system for revenue agencies.

Ms Arroyo wants Congress to pass the measures because, according to her, improving revenue collection alone would not be enough to cover the budget deficit and finance her programs. The deficit is expected to hit P200 billion this year.

For the petroleum tax to be adopted in the House of Representatives, it must get the support of more than half of the 236 members of the chamber.

But a number of members of the House have formed a group to oppose the new tax measures. A total of 139 representatives have reportedly joined the Alliance of Legislators Against Regressive Taxes (Alert), which urges the government to improve tax collection first before imposing new ones.

Alert has allies in the Senate. Both administration and opposition senators have objected to the proposed tax measures, saying that Malacañang should go after tax cheats and plug leaks in revenue collection instead of imposing additional taxes.

Senate President Franklin Drilon said that "unless we address it (the deficit), we'll have a fiscal crisis."

However, Drilon wants the government to first collect taxes more efficiently.

Tremendous leakage

Tax collection is down to about 12 percent of gross domestic product (the value of goods produced and services rendered), one of the lowest in Asia, from about 17 percent in 1997.

"There is tremendous leakage in the system," said Manila-based business consultant Peter Wallace of Wallace Business Forum, who points to rampant evasion both among corporate and individual taxpayers.

While government figures showed there were 6.75 million employees, 3.3 million privately owned motor vehicles and 3 million credit card-holders in the country, only 2.09 million people filed their tax returns in 2002, he said.

He estimates about P35 billion in income taxes went uncollected that year.

No choice

In an interview, Salceda said: "We might have no choice in this case, except to bite the bullet."

He said the policy choice was to either impose a petroleum tax or increase VAT (value-added tax) rates.

"A VAT increase will impact on the whole range of goods and services affecting both rich and poor, while a petroleum tax is less regressive," Salceda said.

To make the fuel tax palatable, Salceda is claiming that it is not exactly antipoor.

He said his study found that 96 percent of the country's fuel consumption and transport fares were borne by "families with income above minimum wage."

Salceda was referring to income classes starting with those earning from a low of P60,000 to P79,000 a year to P250,000 and above.

Lowest pump price

The study also noted that the Philippines had the lowest pump price in peso terms in the region.

It showed that as of Aug. 3, 2004, unleaded gasoline and diesel cost P25.73 and P20.23 per liter, respectively, in the Philippines, much lower than the unleaded gasoline and diesel in Cambodia, which cost P36.25 and P24.65 per liter, respectively.

One of those against a new tax on fuel is Rep. Teodoro Casiño (Bayan Muna), a member of Alert.

"Filipinos have already been battered by seven oil price hikes this year, and more are expected to come as international prices of crude and petroleum products soar to record highs," he said.

The tax measures that Casiño was referring to were Executive Order No. 336 and HB 1323. EO 336, which was signed by Ms Arroyo days before the 13th Congress opened, raised oil tariffs from 3 to 5 percent.

"Once implemented, these oil tax measures will raise domestic pump prices by at least P2 per liter," Casiño said. "Both adjustments will be borne by consumers, not the oil companies."

Deregulation law

Anakpawis Representatives Rafael Mariano and Crispin Beltran have filed House Bill No. 1065, which seeks the repeal of Republic Act No. 8479, or The Downstream Oil Deregulation Act of 1998.

"One of the solutions to an impending oil crisis is to return the regulatory powers of the government to the oil industry," Mariano said.

He noted that eight years after the oil industry was deregulated, oil prices increased at least 60 times and "appears unstoppable."

"Oil companies habitually use the increase in prices of crude in the world market, peso devaluation, the decrease in world oil production and the conflicts in the Middle East as justification to arbitrarily raise their prices," Mariano said.

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