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Gov't to lose P54B if VAT on oil is scrapped - Teves


The Philippine government will lose P54 billion in potential revenues if the 12-percent value added tax on oil products is scrapped to ease the impact of soaring oil prices on the local economy, Finance Secretary Margarito Teves said Wednesday. Foregoing this revenue would in turn hamper the government's plan to balance the country's budget, after a decade-long era of budget deficits, by the end of the year. “I think the objective (of scrapping the RVAT on oil) is good except that it has consequences. This year, the estimated revenue from the 12 percent VAT on oil is roughly P54 billion," Teves said. This is why, he explained, that any move by lawmakers to scrap or lower the sales tax on oil will be junked by President Gloria Macapagal Arroyo. Fiscal reform is widely acknowledged to be President Arroyo's key economic policy. The reformed VAT law lifted the exemption of oil products from the mandatory sales tax. It likewise raised the VAT rate to 12 percent from 10 percent and the minimum corporate income tax to 35 percent from 32 percent. Instead of scrapping the VAT on oil, Teves said the Cabinet has agreed to just redistribute revenues from this tax to sectors affected by high oil prices like the transport sector. “The best approach seems to be to maintain that P54 billion and reallocate and channel it to affected sectors," Teves added. President Arroyo ordered a reduction of the oil import tariff to 2 percent from 3 percent on Tuesday. The tariff will be further reduced to one percent if crude oil climbs to $92.41 per barrel and diesel hits $110 per barrel. Crude oil has averaged $93.28 per barrel and while that of diesel averaged $115.65 per barrel in the first seven days of January. Government estimates show that pump prices will go down P0.23 per liter and P0.25 per liter for every percentage point reduction in the import tariff. - GMANews.TV

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