Press Release
May 22, 2008

Zubiri : Government should study removing VAT on public transport sector

Senator Juan Miguel Zubiri said " government should consider the removal of Value-Added Tax on oil and oil products for public transport use like jeepneys, buses and cargo trucks for basic goods from the farm."

"The loss to government on decreasing VAT collection with this proposal would be minimal if we limit the VAT exemption to buses, taxis, jeepneys and trucks used to transport basic goods, if the status quo of not removing VAT on oil and oil products is maintained."

"Government will stand to gain a windfall from increasing VAT collection on news that world oil prices have breached the $130 per barrel mark. Government stands to collect P143 Million a day from VAT on oil."

"It is ironic that government revenue will balloon to such a degree but at the expense of the rest of the country. All are affected not just commuters who pay P1 more for jeepney fares."

"Congress is bent on helping raise the take-home pay of workers in the government and private sectors. However, the rising price of oil is just gobbling up whatever small amount we give them," he said

Zubiri said that "the tariff reduction is not enough to help the consumers especially with the prognosis that world oil prices will hit the $200 per barrel mark this year."

Zubiri already filed a bill scrapping VAT on petroleum and petroleum products and on power. "The law can be amended to respond to this difficult situation."

"Government's windfall is downright disastrous for consumers. I exhort Malacanang to support the Senate's efforts to stem the rising cost of fuel especially from the VAT imposition which is directly passed on to consumers."

Zubiri said the "government should study at the least the imposition of a multiple rate VAT if it just cannot forego its VAT collection from petroleum and petroleum products. For example, diesel consumers like jeepney drivers should be given more discounts."

Zubiri explained that assuming the 12 per cent VAT will continue to be collected on petroleum and petroleum products and that $130 per barrel price remains for the rest of the year, the government will collect around P52 Billion with the annual oil importation, based on total petroleum import of 78,097,000 barrels for 2006 (National Statistical Coordination Board, 2007).

Translated to a per day average importation of 213,964 barrels, then government would have collected $ 15.60 or P 670 VAT per barrel per day on $130 per barrel oil or a total of P143 Million on oil imports a day, Zubiri said.

If oil prices stayed at price levels in April at $120 per barrel, the government would have collected $ 14.40 or P604 per barrel at P42/US$ exchange rate. Had the price for the rest of the year remained $120 per barrel, government would have collected P47.23 Billion VAT from imports for the whole year.

"If the scenario of $200 per barrel comes, then government will collect P1,030.80 per barrel VAT at the current exchange rate of P42.95. Worse, if oil price stays at $200 per barrel for a year, government's windfall would be P80 billion based on 78 Million barrels annual import."

"That's P80 Billion from consumers from the manufacturing, farming, food processing, fisheries and land, water and air transport sectors who are just a few of the critical sectors that are large users of oil.

Zubiri said that "only government will be laughing its way to the Treasury with windfall on rising oil prices."

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