Press Release
March 13, 2012

Pagcor, PCSO & Malampaya funds could replenish losses from VAT cut

Sen. Ralph G. Recto today said any reduction in the 12 percent value-added tax (VAT) should be off-set by existing revenue streams that are not reflected in the annual national budget.

Recto, Senate ways and means chairman, likewise objected to a multi-tier VAT rate for different industries, specifically for oil and power but supports an omnibus cut in VAT rate to 10 percent from 12 percent as contained in his proposed measure.

"I'm ready to listen and hear all proposals. I understand that the government, including the Senate, must show some compassion amid rising oil and commodity prices," he said.

"I believe the prescription for the 12 percent VAT as an economic medicine has expired. It's time to lower the dosage," Recto added.

The senator, however, said the multi-tier VAT would be "bad for businessmen and bad for BIR" since it would be hard to administer.

Recto said adopting a reduced VAT rate for a single sector like oil would open the "floodgates" for other industries like power to demand for the same special treatment.

"The only way to reduce it is to do it across the board - all sectors subject to VAT must revert to 10 percent," he said.

The senator, however, doubted if oil companies would bring down their prices once the VAT is reduced to 10 percent even as the Department of Trade Industry (DTI) won't be able to stop price abuse since it remains as a deregulated industry.

"There's no guarantee really. They could lower the prices for a week or so and revert to high prices with new made-up alibis," he said.

Recto nevertheless said the lost revenues from VAT reduction should be replenished with funds from the Philippine Amusement and Gaming Corp. (Pagcor), Philippine Charity Sweepstakes Office (PCSO) and the Malampaya gas project.

The senator reiterated that the revenues of Pagcor, PCSO and from the Malampaya royalties should now be migrated to the treasury and consequently be included in the annual drafting of the national budget.

"The funds from these three are sufficient enough to pay for the lost revenues," Recto said.

Currently, the three items are not factored into the budget and treated as off-budget items subject to the full control of the Office of the President.

Pagcor expects a P45 billion gross income this year while PCSO reported a P31 billion income in 2011.

Government's share from Malampaya, on the other hand, has now reached P200.4 billion since the project started commercial operations in 2002, of which $1.1 billion or more than P43 billion represented royalties for 2011.

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