Press Release
March 9, 2011

Govt, oil firms asked to sacrifice by slashing VAT
or rolling back fuel prices using VAT proceeds

Saddled with soaring prices of petroleum and basic commodities, the Filipino people would welcome a "sacrifice" by government and oil companies through a possible reduction in the 12 percent value-added tax (VAT) or subsidizing a price rollback for fuel used by public utility vehicles (PUVs).

Sen. Ralph G. Recto yesterday said the government may have to sacrifice its "extra-ordinary" revenues from VAT in oil products by agreeing to a reduction that could push downward fuel pump prices.

He noted that not only oil companies are reaping windfall profits from the current situation but also the government from its VAT collection in oil products.

For every rise in price of fuel, the government earns extra in the form of higher VAT collection.

Aside from a VAT reduction, Recto said the government could also use its VAT windfall to subsidize a price rollback in diesel used by PUVs to ease the burden on commuters.

"Diesel should be restored to its pre-Libya level to provide relief to the commuting masses and ease pressure on fare rate and prices of basic commodities," he said.

Recto said with diesel prices rising by at least P3 per liter since last week, the government could use its VAT proceeds to effect a rollback and restore the diesel pump price to its pre-Libya turmoil level.

"I agree with the calls for sacrifice during these hard times but would the government and oil companies be also willing to sacrifice?" Recto, Senate ways and means chair, asked.

"Kung pinagsasakripisyo nila ang mga tao, pwede rin ba ang gobyerno? Handa rin bang magsacrifice ang mga kumpanya ng langis?" he added. The senator said oil companies for their part could be called in to participate in the burden-sharing by absorbing half of the supposed price rollback.

"Government could subsidize half of the price rollback while oil players will pick up the tab for the rest," he said.

This way, the senator said, the government will only shell out P1.50 from its VAT income with the other P1.50 price rollback to be absorbed as "sacrificial losses" by the oil companies. "If this is to be done, let's do it immediately," Recto said.

Recto nevertheless maintained that oil prices are overpriced and that the oil industry was only cashing in on the unrest sweeping major cities of Middle East and across North Africa.

He also questioned the government's shift from ensuring cheaper oil prices to sustaining adequate fuel supply.

"This could be misleading since the major Arab oil producers are declaring adequate global supply despite the unrest in the Middle East and North Africa," he said.

"By focusing on the supply side, we're surrendering our price woes for supply concerns, which should not be the case," the senator added.

Recto said before calls for sacrifices came to fore, motorists in Mindanao and Visayas were already toiling from higher oil price regime compared to their counterparts in Metropolitan Manila.

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