Press Release
January 13, 2008


Sen. Mar Roxas on Sunday said he is still counting on the energy summit called by Malacañang to tackle his proposal to temporarily suspend the collection of the 12 percent value-added tax (VAT) on oil products for at least six months.

"It's the job of government to reassess or change solutions when facts change. It's foolish not to change medicines when the infection has already morphed to something else," Roxas insisted.

The president of the Liberal Party explained that in 2005, when the EVAT Law was enacted, the annual budget deficit was at P250-B while oil was at $30/bbl in the world market. Today, the government claims to have zero deficit with oil at an extraordinary price of $100/bbl.

"When government deficit was high, the people willingly helped out through EVAT. Now, our people are suffering from high oil prices so government must fulfill is duty to help by suspending the 12% EVAT on oil," Roxas explained.

Roxas, chair of the Senate committee on trade and commerce, filed Senate Bill 1962 last year, seeking to suspend the VAT on petroleum products for at least six months, or until world oil prices have stabilized. This was when oil prices first flirted with $100 per barrel.

On Sunday, Roxas warned that world oil prices could possibly surge higher -- well past $100 per barrel. He cited the projection made by Morgan Stanley Inc., one of the world's leading investment banks, that oil could hit $115 per barrel soon. Once this happens, the one percentage reduction in oil tariffs would not make a dent on people's wallets.

"The question now really is, whether the government should continue collecting the VAT on oil products. Or if the tax should be suspended to allow our people -- consumers -- to keep more money in their pockets at this time of abnormally high oil prices," Roxas said.

The senator said he expects more criticisms from administration officials and allies but shrugs this off as part of the debate process. "They prefer to attack my motives or resort to name-calling while skirting the real issue on whether or not our consumers deserve immediate relief during these extraordinary times of high oil prices."

"I am absolutely convinced that the right thing to do is to allow Juan de la Cruz to keep more money in his pocket," Roxas said, adding that consumers will spend the money anyway on the goods and services they need the most, which are also levied with EVAT. The senator said his proposal is also "consistent with burden-sharing between the government, industries and the people."

"As a result of the expanded VAT and other prior tax reform measures as well as aggressive privatization, the government is now on the verge of balancing the budget, or possibly even posting modest surplus," Roxas pointed out.

"Thus, the government is now in a superb position to sacrifice potential extra revenues in favor of consumers that have been reeling from soaring fuel prices," Roxas stressed.

Finance Secretary Margarito Teves earlier said the government may have closed 2007 with a budget surplus of P300 million. He said the government was still computing the total revenues collected and the exact expenditures in 2007.

If total revenues reached $1.136 trillion, the government may have achieved the P300-million surplus. If revenues reached only P1.126 or P10 billion less, then government ended the year with a P15.1-billion deficit. This is much better than the government's P63-billion deficit ceiling for 2007.

Malacañang has called a four-day energy summit to draw up strategies to address the economic hardships produced by record high oil prices. The summit would be held Jan. 29, Jan. 31, Feb. 5 and Feb. 7.

Roxas said he expects summit organizers to involve various sectors, including cause-oriented groups as well as labor and transport unions, in finding solutions to the economic problems associated with record high oil prices.

"We expect sectoral groups to be invited to the Summit so they can air their sentiments to government. I call for an open debate on this vital issue within and outside the halls of the Senate" Roxas said.

"However, if the summit is just for show and will not deviate from a pre-approved script, then the summit will just be for photo-ops," he added.

The Roxas proposal would effectively reduce fuel prices by about P4 per liter, and cost the government P52 billion in foregone tax revenues annually. At this rate, the six-month suspension of the VAT on oil products would cost the government P26 billion.

Roxas, however, said the amount of potential tax revenues that will be waived by the government is actually lower, at around P23 billion over a six-month period.

"This is because once the government puts the P26 billion in the pockets of consumers, the money will surely get spent on some form of taxable consumption. So the foregone revenues is actually around P23 billion, which is 10 to 12 percent less than the P26 billion," Roxas said.

Roxas, meanwhile, said the Department of Finance's claim that the oil tariff cut would be "revenue neutral" betrays the ineffectiveness of the trim.

"If true, then this means the government will give up nothing in favor of consumers. It will not waive any income in favor of consumers. This means no money will be transferred from the government's pocket to the pockets of consumers. Thus, there is no material relief here at all for Juan de la Cruz," Roxas said.

"In this sense, the tariff cut will be hardly felt especially once a new wave of oil price hikes begin," Roxas said.

News Latest News Feed