Look at sovereign guarantees rather than VAT, Finance Dept told

“Higher taxes for oil would create a domino effect that would spike the prices of basic goods and services like water and electricity.”


MANILA – Does a cut in income tax have to come with tax hikes elsewhere, with the likelihood of reducing the income of more people? Why not remove, instead, the tax cuts and incentives being enjoyed by the already rich?

This is the gist of the reaction of Makabayan lawmakers this week to proposals by the Department of Finance (DoF) to increase taxes, particularly the Value-Added Tax.

For the employed person who loses up to 32 percent of his or her income to taxes, the Duterte administration’s promise that at least 10 percent of that would be slashed has been hailed as a relief. But if the Finance Department would have its way, that relief would soon be replaced by a new burden. In a statement issued today amid budget deliberations in Congress, Anakpawis Partylist and Bayan Muna questioned the proposed Value Added Tax (VAT) increases.

protest vs VAT
Bulatlat File Photo: Protests against oil price hike and Value Added Tax (QC Sept. 2011)

Increased or expanded VAT threatens to cut down the income of far more number of people, the Makabayan lawmakers said. Referring to the proposal of the Department of Finance to increase the Value Added Tax on oil products, Bayan Muna Rep. Carlos Isagani Zarate said, “This proposal is anti-people and would definitely have an adverse effect on consumers.”

Anakpawis Rep. Ayik Casilao, meanwhile, told Bulatlat that any tax hike on oil products would raise prices. He said that taxes like the VAT are indiscriminate. A cut in income tax affects only those who have jobs and income deemed taxable by 30-percent. “But, a hike in oil VAT will increase the taxes being paid not just by the employed but also by the unemployed and without income,” Anakpawis Rep. Casilao said.

The Department of Finance is proposing to hike to P10 ($0.22) per liter the levy on regular gasoline and products such as aviation turbo jet fuel, lubricating greases and oils, leaded and unleaded premium gasoline, naphtha, as well as petrolatum and waxes.

For diesel and oil products currently exempted from excise tax, including asphalts, bunker fuel oil, denatured alcohol, kerosene, liquefied petroleum gas (LPG), and processed gas, the DoF proposes an increase to P6 ($0.13) per liter.

If approved, the VAT on oil products would increase by 77 percent and 130 percent, Anakpawis Rep. Casilao said. Using even just a crude math analysis, he told Bulatlat that it is a big increase. It is a big increase that indiscriminately will affect more people. And it also dwarfs the would-be relief in income tax of the few employed.

VAT hike counterproductive

Bayan Muna Rep. Carlos Isagani Zarate said the tax increase for oil products would be counter-productive and would wipe out or at the minimum, drastically reduce the benefits of lower income taxes.

protest against oil price hike
Bulatlat File Photo: Anakpawis in one of its protest actions against oil price hikes, February 2015. The group has long been proposing that the government become the exclusive importer of crude oil and petroleum products so the country may effectively search for the cheapest source of oil.

“Higher taxes for oil would create a domino effect that would spike the prices of basic goods and services like water and electricity. Just imagine, how much a P10 increase in gasoline and P6 increase in diesel would affect the price of rice, fish and meat?“ Rep. Zarate said.

Instead of increasing VAT rates and coverage, there are other sources of funds, “nontax means,” according to Zarate. He urged his fellow lawmakers to look at the national budget for other ways to defray the lost tax revenue from lowering income tax.

He pointed to some examples: the Risk Management Fund, P30 billion ($646 M); the Comprehensive Automotive Resurgence Strategy, P28.2 billion ($600 M); the Industry Competitive Fund, P5 billion ($108 M).

“Instead of increasing taxes or expanding the VAT, we hope that Finance Sec. Carlos Dominguez III would help us in scrapping VAT from basic services like electricity, water, oil products and even systems loss,” Zarate said.

As lawmakers deliberated on proposals that would further increase prices of oil products, pump prices of diesel and gasoline increased anew (P1.45 and P1.35 per liter respectively) on August 23, just a week after a P0.55 increase in gasoline and a P0.70 increase in diesel. Even without hiking the VAT or excise tax already imposed on oil products, the government gets a corresponding increase in tax take for every increase in oil prices. (https://www.bulatlat.com)

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