VARIOUS groups insist that the Arroyo administration permanently lift the 12-percent value added tax (VAT) on petroleum products, nationalize the oil industry and immediately repeal the oil deregulation law to give the public a respite from the continued increase in oil prices. This despite President Arroyo’s order yesterday for a one-percentage cut in the country’s oil import tariff, from three percent to two percent, as its “quick response” to the spiraling cost of crude oil. Government expects this move to lead to a pump-price reduction of between 23 and 25 centavos a liter at best.

Removing the VAT on petroleum products is expected to pull down pump prices by as much as P4.50 per liter. A full import tariff suspension, meanwhile will only result to a reduction of 70 centavos per liter if applied to diesel products only and 75 centavos if applied to all products.

Independent think-tank IBON Foundation says Malacañang’s response will only benefit transnational corporations (TNCs) from the import tariff cut, since this cost is borne by consumers in the first place. “Experience shows that TNCs pass on costs of high tariffs to pump prices but enjoy savings when tariffs are low,” the group said.

George San Mateo, secretary-general of the transport group Pinagkaisang Samahan ng mga Tsuper at Operator Nationwide (PISTON), says a similar move by Arroyo last year did little to pull down pump prices. PISTON is also demanding the removal of VAT on oil products and the nationalization of the oil industry.

Senator Mar Roxas scored Arroyo’s economic team’s assessment that a VAT moratorium will result in a weaker peso, less government services, and a bigger budget deficit. “We will only let the people’s suffering continue if we do not act now to suspend the EVAT on oil. Our consumption-dependent economy will stall as our people’s purchasing power continues to weaken due to high oil prices,” he said. He also scoffed at Malacañang for choosing its “macho goal” of a balanced budget over its duty to provide financial relief to millions of households facing monthly budget deficits.

As of January last year, IBON already revealed that the prevailing pump price of gasoline and diesel is now more than twice their price when Gloria Macapagal-Arroyo took over in January 2001.” (See Table)

Before deregulation (1972-1995 average)
Start of deregulation (prevailing pump price on April 1996, the month RA 8180* was passed)
Start of Arroyo’s term (prevailing pump price on January 2001)
Present price (prevailing pump price as of January 2007)
* RA 8180 refers to the first oil deregulation law which was replaced by RA 8479
Compiled by IBON based on DOE data

IBON says while the Arroyo administration may argue that the price increases were due to developments in the world oil market, Malacañang should still be held accountable for the deregulation policy that allowed domestic oil prices to soar. The group says that as of last year, oil companies have increased the price of petroleum products by 535 percent since the Oil Deregulation Law was first implemented in April 1996.

The group warns that the increase in oil prices means higher cost of living and an erosion of wages and income this year. It says ordinary households, already facing higher costs of basic goods, water and electricity bills, now have to fork over an additional P76.94 for an 11-kilogram liquefied petroleum gas (LPG).

IBON says jeepney drivers, who are estimated to consume an average of 30 liters of diesel everyday, now have to spend around P1,125.90 to P2,025.90 for diesel even before they can start meeting their required “boundary” or vehicle rental of P600 to P900 per day. “Last year alone, a jeepney driver’s daily expense for diesel increased by P147.30 as the prevailing pump price of diesel jumped by P4.91 per liter between January and November 2007,” the group said.

Filomeno Sta. Ana, coordinator of Action for Economic Reforms, says the government and consumers should now focus on long-term, environment-friendly solutions that will insulate the country from spiraling world crude prices. “People’s behavior has not changed. From an environmental point of view, oil prices should increase to promote oil conservation,” he said. He adds that slashing taxes to pull down pump prices only benefits the middle class but leaves out the non-poor, who consume less fossil fuel.

2 Responses to More drastic moves urged to cushion impact of higher oil prices



January 9th, 2008 at 11:41 pm

I really don’t mind if the government keeps the 12% value added tax on fuel products on one condition: eliminate the widespread graft and corruption especially in high levels of the administration. It is revolting to see high-ranking officials steals hundreds of millions of pesos without so much as a slap on their wrists while more than one-half of the Filipino population wallow in poverty. This is an area where the Arroyo administration performs poorly and is a root cause for the massive dissatisfaction in her leadership. It is time for President Arroyo to demonstrate her seriousness about stopping corruption and punish those guilty, not matter how close these officials may be.



January 14th, 2008 at 4:56 pm

High oil prices are here to stay. I just home certain sectors are man enough to accept it & recognize it. because it will be the first step to finding solutions to the problem.
Insted of being a society of “professional blamers & fault finders & always passing the responsibiliy to someone else.
I remember MMDA bayani Fernando pushing for the bus terminal system in oder to regulate traffic & bring higer efficiencies in operataion.But just like anything & everything in this cursed society he is always contradicted & oppossed.
Jeepny drivers can organize themselves too in a terminal system that drops of passengers from point to point insted of having to stop a million times w/c means higher consumption of fuel.
If only public sector is better organized on the road I’m sure that it will solve a big part of our traffic problems.
Sen. mar Roxas proposal of suspending VAT is an act of “dirty popular” politics identified w/ cowards who insted of facing the problem look for a “popular” way out specially since his running for president in 2010.
Let’s not be so naive to say that we must get rid of graft & corruption as a way of accepting the high oil prices.
Graft & corruption is so deeply rooted in this country that certain people comit it everyday even w/o knowing it. Because it is something that even a part of our culture already w/ the “pakikisama” system or our “sige na lang at puwede na” attitude.
Before we demand things from others, lets first squezze our brains for what we as individuals can do insted of letting ourselves be controled by certain “groups” who exploit situations for their own agendas.

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