POSTSCRIPT / March 18, 2012 / Sunday


Philippine STAR Columnist

Share This

With no alternatives, gov’t keeps 12% VAT

PALACE STUMPED: Malacañang has shot down the idea of suspending, or reducing, the 12-percent Value-Added Tax on oil-based fuel, explaining that the VAT collections were needed for government “social” programs.

It appears, though, that Malacañang is keeping the status quo on fuel pricing because it does not know yet what to do. Protesting consumers call this indecision “Noynoying,” a new street slang for just sitting there without doing anything.

Deputy presidential spokesperson Abigail Valte said the other day the administration’s economic managers would have to study first the implications of reducing the VAT on fuel as a way to lower fuel pump prices.

They have not studied the matter the past two years? We can believe that, because when consumers complain of fuel price hikes, the administration simply trots out its worn-out promise to study alternatives to petrol and threatens to audit the books of the oil firms. No new ideas.

* * *

TOTAL COLLECTION: To firm up its excuse that VAT helps finance programs, the administration better inform the public first how much in pesos is the actual collection representing the 12-percent tax.

What is the total annual sales of goods and services subject to VAT? Using that total, we should be able to determine the aggregate 12-percent VAT collections due the government.

We dare say that an honest accounting would show that the government does not receive the entire 12-percent VAT collected for it. One figure I have seen shows that only a quarter of the 12-percent collections actually goes to the government.

We ask the government to prove this calculation wrong by coming out with the audited figures for goods and services, if it has them.

* * *

TAX FOR OIL FIRMS: We have been told that a substantial part of the 12-percent tax is retained, returned or credited to the oil firms as input tax (one of the two components of VAT, the other one being output tax) that the importer/refiner had paid to the government.

One question often asked is why the tax is in effect being collected for private merchants. By definition, taxes accrue to the government, but in the case of VAT, more than half of the tax collected reportedly goes to the merchants in the sales/distribution chain.

Taxpayers will be disposed to paying taxes without feeling cheated or unfairly deprived if they are told in advance – maybe via a graphic breakdown — where the 12-percent VAT actually goes. We cannot just tell consumers vaguely that VAT goes to “projects.”

In the case of fuel, the cost of the crude oil – on which excise tax is collected — is some 80 percent of the cost of the finished products when taken out of the refinery. That tax paid on the crude is tacked on to the retail price, but is returned to the oil firm.

This is described as “lagareng hapon” (with apologies to our Japanese friends), which means that the oil firms collect twice coming and going.

* * *

PRICING FORMULA: There is actually no need for the oil firms to apply for price increases. Prices are determined by a formula that factors in all variables, including the import cost of the crude, the refinery cost, the dollar-peso rate, et cetera.

Once all the factors are put into the blanks, the pump price just pops up without the Department of Energy and regulatory agencies having to interfere. There could be minor variations in pump prices when dealers add their own markups in the deregulated market.

A contentious element is WHEN to effect the price adjustment. It has been noticed that oil companies are superfast when raising prices but extremely slow lowering them. The government should act on this.

There is also the fact that a big number of dealerships or gas stations are owned and operated by the oil giants themselves, giving them tighter control over the retail end of the business.

* * *

KALIKASAN: We support the petition for a Writ of Kalikasan (Environment) filed with the Supreme Court by 315,849 residents of Las Piñas City led by former Las Piñas congresswoman Cynthia A. Villar seeking to stop a massive bay reclamation that threatens their community.

Named respondents were Alltech Contractors Inc., Philippine Reclamation Authority, Department of Environment and Natural Resources, Environmental Management Bureau and the City Government of Las Piñas.

The petitioners asked the SC to stop the so-called “Parañaque and Las Piñas Coastal Bay Project” that they said will obliterate the wildlife habitat in the area and expose to flooding the residents of Las Piñas, Parañaque City and the town of Bacoor in Cavite.

* * *

ILL EFFECTS: The project involves the reclamation of 635 hectares of submerged coastal areas of Manila Bay and their development for commercial, residential and other purposes.

Alltech claimed that the project is just a continuation of the “Manila Bay Land Reclamation Project” of the Public Estates Authority (PEA, now the PRA) and the Amari Coastal Bay Development Corp. The project involved the infamous PEA-Amari contract voided by the SC.

Ms Villar said the reclamation project will wreak havoc on some 176 hectares of land serving as the wildlife habitat of more than 195 species of birds. Some of the most endangered species in the world, she said, can be found there.

Tricore Solutions Inc., a hydrological services consultant engaged by Villar, has reported that the reclamation project will result in the flooding of barangays in Bacoor, Las Piñas and Parañaque under more than five meters of water.

* * *

(First published in the Philippine STAR of March 18, 2012)

Share your thoughts.

Your email address will not be published.