In the wake of a new wave of price hikes of petroleum products and basic goods, the removal of the 12% value-added tax (VAT) on oil products is urgent in order to give immediate relief to millions of poor Filipinos, according to independent think-tank IBON Foundation.

IBON executive editor Rosario Bella Guzman pointed out that the recent round of oil price hikes is more than enough reason to remove the VAT on oil products, particularly in the wake of the recently released official poverty figures showing that the number of poor Filipinos is increasing.

It has been estimated that if the 12% VAT on oil products were removed, pump prices could go down by P4 a liter and liquefied petroleum gas (LPG) by P60 per 11-kg cylinder. “These could help the millions of poor Filipinos through savings on their fuel bills,” Guzman pointed out. “Fuel-intensive local establishments would also benefit through lower production costs.”

In 2006, the government earned P49.15 billion from VAT on crude and petroleum products. This could easily be offset through revenue measures that are less burdensome to Filipinos, such as plugging tax leakages. In 2006, government lost P82 billion in uncollected corporate income taxes and an average of P57 billion annually in uncollected VAT.

“In the wake of the worsening poverty problem, such measures that would give the quickest relief to a greater number of Filipinos are important,” said Guzman.


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