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Govt approves package funded by excess VAT


MANILA, Philippines - A final P4-billion package of initiatives funded by excess revenues from the value-added tax (VAT) on oil has been approved and released by Malacanang. The expenditure, facilitated by the “windfall" collected when crude prices hit record highs last year, was greenlighted by President Gloria Macapagal-Arroyo in December, a Finance department official said. It was the final tranche of the so-called Katas ng VAT (loosely, fruit of the VAT) program — designed to mitigate the impact of 2008’s skyrocketing food and fuel prices — which has cost the government P16.5 billion. “The funds were released already ... The President approved it (the package) last December," said Rosalia V. de Leon, chief of staff of Finance Secretary Margarito B. Teves and also officer in charge of the department’s International Finance Group. The latest package went to an agricultural guarantee fund, the National Irrigation Administration (NIA), and an industry competitiveness fund. Ms. de Leon said there was an emphasis on agriculture given the policy of ensuring food security. “We also have to respond to the needs of agriculture. We have the rural infrastructure and farm to market roads but we want to make sure that there is [also] productivity," she said. The agricultural guarantee fund was given P2 billion, to be managed by the Land Bank of the Philippines and used to backstop loans of farmers who are in need of fertilizer and farming equipment. The NIA, meanwhile, received P1 billion to pay for loans with the National Development Corp. (NDC). “The funding will be used to pay NIA’s loans to NDC so the NDC can release funds for other relevant projects," Ms. de Leon said. The final P1 billion was allocated for an industry competitiveness fund aimed at encouraging investments amid the global downturn. “We are still preparing an EO (executive order) for this but the funding will be used to enhance the competitiveness of the country. This will provide incentives to encourage investments and job creation," Ms. de Leon said. She said the VAT windfall had effectively ended in the third quarter as crude prices began falling from the all-time high of $147 per barrel hit in mid-2008. Crude prices are now below $40 per barrel, pulled down by the global downturn. Last year’s volatility, which led to domestic fuel prices hitting P60 per liter compared to P35 currently, prompted the Katas ng VAT program which originally focused on subsidies and cash handouts for the most disadvantaged. The first tranche was announced in June, with subsequent ones unveiled in July and October. A first P4 billion went to cash handouts for lifeline power 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). A second P4-billion package provided fresh subsidies for another batch of lifeline users (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). The third, a slightly higher P4.5 billion, was for additional support to the Fields (Fertilizer, Irrigation, Extension and Education for farmers, Loans, Dryers and post-harvest facilities, and Seeds) program (P2 billion), a feeding program for provinces affected by the fight against Muslim rebels (P500 million), the rehabilitation of conflict-infested areas (P500 million), more power subsidies (P400 million), assistance for small businesses (P600 million), and schoolbuilding construction (P500 million). Finance Undersecretary Gil S. Beltran said the government was unlikely to record another VAT windfall this year as demand for oil had fallen due to the global economic slowdown. “It (excess revenues from the VAT on oil) is very unlikely due to current conditions," he said. Mr. Beltran noted that the government had forecast benchmark Dubai crude to sell for $75 per barrel this year, far higher than the current price of around $40. - Alexis Douglas B. Romero, BusinessWorld
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