Philippine president snubs calls to scrap oil tax

The taxes on oil and gas are probably much less than in many countries. These taxes do help to reduce usage but at the same time they have an uneven impact on people depending upon income. This type of tax is regressive in that high and low income people pay exactly the same percentage but the impact on their total incomes is quite different.
While lower income people may not pay a lot because they don't drive Hummers, they do depend upon jeepneys who must increase their fares to keep in business when diesel and gas prices rise. Arroyo is right that reducing or eliminating tax would eliminate revenues. She talks as if all those revenues are used for programs for the poor! Haha! But no doubt some are but there are other types of taxes such as a more progressive income tax. I am not sure how efficiently taxes such as that are collected in the Philippines though.

Philippine president snubs calls to scrap oil tax 2008-07-16 15:11:08

MANILA, July 16 (Xinhua) -- Philippine President Gloria Macapagal-Arroyo on Wednesday said the government would not remove or reduce the 12-percent value added tax (VAT) levied on oil consumers despite repeated calls for her to do so to mitigate the impact of spiraling world oil prices.
"Repealing taxes on oil and power will strip the vast majority of our people the means to ride out the world food and energy crisis," Arroyo said in an event held here to promote the use of energy-saving light bulbs to cut electricity bill.
She said the revenues generated by the oil VAT can be used to effectively subsidize people who live under the poverty line and use far less oil than the average.
Arroyo said to scrape the oil VAT at the height of global economic downturn is to "give up the enduring strength for popular but counter-productive, short-term gains."
"If VAT on oil and power is lifted, how do we replace more than70 billion pesos (1.54 billion U.S. dollars) in revenues mostly used to fund projects for the poor," she said.
She said the revenues produced by oil VAT have shielded the nation from the worst effects of the food and fuel crisis.
Calls to scrap the oil tax has been resurging after the price of oil climbed to record high on the international market. Even the powerful Catholic Church in the Philippines had openly urged the government to remove the oil tax.
But the government said it is working hard to cushion the damaging effects of the skyrocketing oil price exerted on the average Filipino but the removal of oil tax is not an option, at least for now, with concerns that such move might undermine market confidence.
The government levied the value added tax on oil and power since 2005. The measure has effectively improved the government's fiscal performance.


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