‘Katas ng VAT’ initiative to fund new social programs

MANILA, Philippines - Amid sliding crude prices, the government Tuesday announced a package of fresh social programs to be funded by excess revenues from the value-added tax (VAT) on oil in a bid to provide relief to the poor and those affected by the armed conflict in Mindanao. The initiatives, which will cost P4.5 billion and includes fresh subsidies, were announced after Tuesday’s Cabinet meeting in Malacañang. They comprise the third batch of state spending to be funded by the so-called VAT windfall. The first and second packages were announced in June and July, respectively. Placed under what is called the "Katas ng VAT" (roughly, fruit of the VAT) program, the latest plan seeks to allocate funding for an agriculture initiative, feeding programs targetted at victims of the conflict in Mindanao, rehabilitation of conflict-affected areas, subsidies to small power users, support schemes aimed at businesses, and school building construction. "The Katas ng VAT is available due to the economic reforms set by the President. We have the funds that will enable us to focus on the most vulnerable sectors of our society," Press Secretary Jesus G. Dureza declared. Finance Secretary Margarito B. Teves said P2 billion would be used for additional support to the FIELDS (Fertilizer, Irrigation, Extension and Education for farmers, Loans, Dryers and post-harvest facilities, and Seeds) program to ensure food security. Half a billion pesos, meanwhile, will be used for the "Malusog na Simula, Yaman ng Bansa" (literally, a healthy start, wealth of the nation), a new feeding program that seeks to provide for people affected by military offensives against renegade members of the rebel Moro Islamic Liberation Front. Another P500 million will be used as an "early recovery fund" to fast-track the rehabilitation of areas ravaged by the Mindanao conflict. The amount of P400 million, meanwhile, will be spent for power subsidies directed at the so-called lifeline users, or those consuming less than 100 kilowatt-hours per month. Six hundred million pesos, in addition, will be used to establish a "competitiveness fund" to help businesses cope with rising costs. Trade Secretary Peter B. Favila said the allocation for businesses may include power subsidies and various capacity building programs to make firms more competitive. Its use would be determined by the private sector, he said. "They (private sector) have not given us the details. They should tell us exactly how these [funds] should be used." Mr. Favila added that the P600 million would be part of a planned P1-billion competitiveness fund that seeks to encourage more investments in the country. He said the remaining P400 million may be part of the fourth Katas ng VAT package. The remaining P500 million, lastly, will be used to augment funding for the construction of school buildings. Mr. Dureza said details of the projects will have to be threshed out by the cabinet. Citing preliminary data, Mr. Teves said total collections from the VAT on oil for the July to September period were P22 billion, surpassing the target of P13.98 billion. He said more than P8 billion comprised excess revenues due to high oil prices. The Finance chief, however, admitted that windfall collections for the fourth quarter may dry up due to falling crude. "Our concern is if we have enough collections in the fourth quarter. For the last quarter, if our assumption on the oil prices is that it will remain in its current level, then it seems that we would not have any [windfall]. But we have a reserve fund for [the] purpose of spending," Mr. Teves said. Asked to comment on the new initiative, former Budget Secretary Benjamin E. Diokno said the government had merely "repackaged" some existing programs already being funded by the national budget. "The FIELDS is already covered by the budget of the Agriculture department and the AFMA (Agriculture and Fisheries Modernization Act). The construction of school buildings is also covered by the national budget. The funding for refugees can be sourced from the Mindanao calamity funds," he said in Pilipino. Mr. Diokno, budget chief during the Estrada administration, said he does not expect further windfalls from the VAT on oil due to recent global developments. The first Katas ng VAT package allotted P4 billion for the following: power subsidies to lifeline users (P2 billion), scholarships and student loans, (P1 billion); the conversion of public utility vehicles to make them more energy efficient (P500 million); and the replacement of incandescent bulbs with fluorescent lamps (P500 million). The second provided another P4 billion for: continued power subsidies (P1 billion); loans for the wives and relatives of transport workers (P1 billion); rehabilitation of areas damaged by typhoons (P1 billion); upgrading of provincial hospitals (P500 million); and cash allowances for senior citizens not covered by pension funds (P500 million).