Militant think tank: Removing VAT on oil can stimulate economy

Removing the value-added tax (VAT) on oil could stimulate the economy by boosting consumption spending, non-government think tank IBON Foundation said Friday. Also, the group said such move would help cushion consumers from the impact of skyrocketing world crude prices. IBON research head Sonny Africa explained that removing the VAT on oil would stimulate economic activity through savings, saying that without the 12-percent VAT on oil, domestic pump prices would go down by as much as P6 per liter. “These savings mean more money for consumers to spend directly on their needs, and less production costs for fuel-intensive businesses" Africa said. Economists, on the other hand, said scrapping the VAT on oil will lead to price distortions. However, Africa claimed that the monopoly pricing and profiteering of oil companies, together with the oil deregulation policy, are actually the factors that distort the prices. He urged the Aquino administration to scrap the VAT on oil, saying that repealing the tax or implementing price controls are not populist measures. “it takes a strong-willed government that has the welfare of the people in mind to implement these urgent measures," Africa said. Furthermore, Africa said the “benefits" of scrapping the VAT on oil would help the transport sector and the commuting public in terms of reduced prices and additional income. The Department of Finance, meanwhile, remains firm with its position that scrapping the VAT on oil would be detrimental to the government’s fiscal position. Estimates made by the Finance department showed that the government may earn roughly P70 billion from VAT on this year from P45 billion last year. Last week, Presidential Communications Operations Office head Herminio Coloma Jr. said Malacañang has not yet closed its doors on moves to limit the VAT on oil, but stressed that such an option was last in a range of priorities. Also he said the government needs the revenues from the VAT as the government is still operating on a deficit. “Hindi natin sinasabing walang pag-asa yan. Yan ay isa pa rin sa menu of options na naririyan nguni’t sa ngayon hindi yan kino-consider na prayoridad. Ang overall fiscal position ng pamahalaan, nasa deficit," he said. — LBG, GMA News