Press Release
August 16, 2011

Cayetano urged government to address impact
of inflation and higher prices

'Higher taxes and higher prices of commodities neutralize the positive intentions
of government programs'

Senate minority leader Alan Peter Cayetano urged the government to address and focus more on job generation, inflation and rising prices as Congress begins discussion on the 2012 national budget.

He explained that the burgeoning prices of commodities and the increase in inflation rates neutralize the desired effects of the additional funds for social services and poverty mitigating programs such as the Conditional Cash Transfer (CCT) program.

"Compared to the few who were given an increase in their CCT allotment, the number of those unable to buy basic food and medicines due to the high prices are still staggeringly high," he said.

Cayetano added that the government should always operate under the assumption that the prices of their projects also increase due to the continuous increase in the prices of basic commodities.

The senator also pointed out that the government should already consider a reduction of the Value Added Tax (VAT) on toll and on gasoline as contingencies to mitigate impact of spiraling prices of goods.

He said the VAT on toll will exacerbate the situation for consumers who are already bearing the brunt of high costs of fuel owing to the VAT.

"Most of our country's basic commodities are transported through highways. If the increase in toll fees is effected with increase in gasoline prices, it's inevitable to see that the prices of basic goods to increase as well," he said.

In this light, Cayetano stressed that the government must not allow itself to be blinded by the high percentage of revenues that come in due to the percentage of VAT from higher oil prices.

Cayetano explained further that VAT collection increases when the price of gasoline increases. He suggested that the government should explore the option of lowering the percentage of VAT once oil prices reach a certain price ceiling.

He pointed out that with proper planning, the government can mitigate the burden of consumers due to higher prices of commodities without affecting government revenue.

"At 12% VAT, the government collects 12 pesos per 100 pesos of oil commodities. Assuming oil prices double due to market forces, we can still collect the same 12 pesos if we lower VAT percentage by half as well," he explained.

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