Malacanang consistently refuses to repeal the reformed value-added tax (RVAT) on oil and power saying that it will harm the country’s revenues. But according to independent think-tank IBON Foundation, there are measures that government can implement which are less burdensome and can generate more revenues than the RVAT.
These measures include improving revenue performance, which according to the National Tax Research Center, could earn the government an average of P57 billion annually in uncollected VAT on items other than petroleum products and P82 billion in uncollected as of 2006.
If government increases its from 14% of the gross domestic product to 16%, this can produce at least P94 billion in a year. These revenues are more than enough to cover the revenue losses from the removal of VAT on oil and power.
Removing the RVAT on oil and power will also help mitigate the significant supply-side pressure on inflation due to high global oil prices and may decrease the inflation rate by 0.5-0.8 percentage points, especially since global oil prices are expected to continue increasing at least through 2008, with improvement only in 2009.
Raising revenues through a regressive VAT is convenient only for the government, which amid the spiraling cost of basic goods and services, should implement revenue-generation measures that do not unduly burden the poor Filipino majority– which is unfortunately what the regressive VAT does