Press Release
January 23, 2008

OPENING STATEMENT OF SENATOR MAR ROXAS DURING THE SENATE WAYS AND MEANS COMMITTEE HEARING ON SUSPENSION OF VAT ON OIL

"I would like to thank you for coming over and being part of this very important public hearing, relative to what is an urgent and a very important measure that is now in the public agenda. This has to do with the removal of VAT from oil products.

"Mr. Chairman, distinguished colleagues, let me first establish that the situation we are in today is very different from the situation when we first imposed the VAT. When the VAT was first imposed, the government was in fiscal crisis annually. The government had a budget deficit in the neighborhood of P200-P260 billion pesos and with no prospect of realistically cutting this down.

"At that time, because the government was in budget and fiscal crisis, the legislature thought it proper to impose new taxes, specifically a VAT on power and oil, theretofore not included in VAT, and increasing the VAT from 10% to 12% on all products.

"The object upon which the VAT was imposed--oil--was trading internationally at about $30 a barrel, and so therefore, the 12% VAT imposition on oil was deemed to be bearable.

"We now fast-forward to January 2008. The government, as per its own accounts, has surmounted its fiscal crisis. In fact, we are now benefiting from the so-called virtuous cycle of lower interest payments annually because the cost of our borrowing both in foreign exchange terms, as well as in interest rate terms, are now lower, due precisely to the sacrifice our people made in having paid the VAT three years ago.

"So the government by its own account is now in relative fiscal balance, our prospects for fiscal integrity remains very robust, and we now see that the object upon which this VAT was placed--oil--is now in the $90-100 per barrel range. Clearly, 12% of $90-100 per barrel oil is very, very different from 30% ( di ba dapat 12% ?) on $30 oil, such that, I would say, it is now unbearable.

"Not only is it unbearable, Mr. Chairman and distinguished colleagues, but it will have serious impact on the consuming public's ability to tend for itself on a daily basis. Oil and transport occupies a larger percent of the daily expenditure of Juan dela Cruz than it does for the richer segment of our people. For the poorer segment of our people, even if it is only 1 liter, but that liter is actually a much bigger percentage of their daily expenditure.

"And so, therefore, we filed, this bill after much thinking, much analyzing and much participation in efforts to amend the Oil Deregulation Law. The debates relative to amendments of the Oil Deregulation Law, all have a purpose of having government, in effect, rescind or reverse the Oil Deregulation Law, and to in effect, re-regulate oil for the purpose of lowering the cost of oil and of transport to the consuming public.

"After analyzing all of these amendments to the Oil Deregulation Law, yours truly determined that the more efficient, more effective and more direct and urgently responsive way would be to simply remove oil from the list of VAT-able products.

"This relief is more than P4 per liter on diesel and about P65 for every 11-kilo tank of LPG. This will have a direct impact and benefit to the people.

"The government does not lose because the monies that are saved will be re-spent by the average person on all other expenditures that are VAT-able, and so therefore, government will continue to collect VAT on all his other subsequent expenditures.

"Mr. Chairman, we have heard the government, through statements, reject outright our proposal. That is their right to reject it. Clearly, they collect it, they feel that it is their money.

"But I likewise reject their rejection. It is not their money, it is our money. We give it to them to spend for us relative to so-called commonly beneficial projects. But first and foremost, it is our money. And during times of stress for us, the government should be open to give back to us?even if only temporarily?some of the money so that we could fend for ourselves.

"A person?and likewise, a government?that is closed-minded, that continues to prescribe the same medicine even if the virus is already mutated, even if the problem has already mutated to another kind of problem, is foolish. I say that the problems we have today, Mr. Chairman, is very different from the problems we had then. And so therefore, our policy must likewise change.

"Thank you very much and good morning."

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