LIFT VAT TO MODERATE PRICE HIKES, IBON URGES GOV’T

Lifting the reformed value-added tax (RVAT) on oil would deliver more direct and indirect benefits to millions of poor Filipinos through lower prices, according to independent think-tank IBON Foundation.

IBON research head Sonny Africa said that removing the RVAT on oil products would result in lower prices that would immediately benefit nearly one million jeepney and tricycle drivers and their families, as well as almost nine million households using liquefied petroleum gas (LPG). Also gaining will be at least three to four million farmers and fishermen and their families paying for irrigation or fuel for fishing boats. He added that other sectors would also indirectly gain as the effect on inflation caused by skyrocketing oil prices would be moderated.

Africa pointed out that the government subsidies funded by VAT earnings do not reach this many people in as sustained a manner. Africa pointed out that VAT earnings are barely used to subsidize pro-poor projects as P6 for every P10 immediately go to servicing the burgeoning debt.

The bottom line is that the VAT, no matter how small the government says the burden is, is anti-poor and already unbearable, Africa said.

If government needs additional revenues, there are other sources that will not unduly burden the poor, Africa said.  These include a genuine and sustained crackdown on corruption which underpins some P140 billion in VAT and income tax evasion annually, reversal of trade liberalization resulting in foregone tariffs of some P100 billion every year, and higher taxes on corporate incomes and luxury goods.

The difficult economic times also underscore the urgency of cutting back on debt service and strengthen arguments for stopping automatic appropriations for debt payments. There could be around P130 billion in savings if even just 20% of total debt payments of P634 billion in 2008 are suspended, Africa said.

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