Category: noynoying

esposo’s “revolutionary situation” #VAT

william m. esposo, philstar columnist and true-blue, i mean, -yellow, aquino supporter, is as annoyed about #noynoying as leftist (pa ba? more like red-turned-yellow) joel rocamora.  and esposo is now calling the youth activists (who coined “noynoying”) “ANAYchists,” as in termites, who undermine stability and peddle unrealistic solutions to the oil price hikes.

i think it’s a poor metaphor.  having to deal with termites where i live, i know they only feed on wood, and they are destructive but can be held at bay.

in fact, there’s nothing wooden about government (well, except the forests under the care of the state, which are mostly gone, converted into cash by a different exclusive breed of anay); and there’s nothing destructive about these youth activists who are really more like askal watchdogs whose barks are worse than their bites.  and it’s not as if, historically, government has not vigilantly, and successfully, held them at bay, as rocamora would know.

of course, the noise that squealing yelping high-alert watchdogs make when faced with suspicious smells and sounds (lalo na when something’s rotten sa kapaligiran) can be most irritating and can keep you awake at night, especially if you or your boss is in charge for another four years.  you must now realize that you guys promised too much, and so “noynoying” has gained traction.  kung walang corrupt, walang mahirap, you said, a promise to address corruption and poverty.  little did we not know that the fulfillment of the promise would hinge on chief justice corona’s and gloria arroyo’s persecution, i mean, prosecution, and conviction.  meanwhile the corruption everywhere else continues, nothing has changed, except maybe it’s gotten worse.

“noynoying” is a clever critique of the president’s do-nothing approach to the spiralling costs of everyday essentials due to the spiralling costs of oil products and electricity.  true, the president is in no position to influence the global ups and downs in the price of oil.  however, he IS in a position to undo gloria arroyo’s VAT on oil products and electricity, which, until gloria, were VAT-exempt, like food and other essentials.  and he IS in a position to ask congress as well to revisit and amend, nay, railroad amendments to, EPIRA, particularly with regard to provisions that allow power companies to pass on all kinds of costs to consumers.

instead, the aquino admin is on damage-control mode, but the defense is weak, we’ve heard it all before, ito na rin ang mga excuse ni gma noon.  but maybe esposo, and his president’s men, have forgotten, or weren’t paying attention:

To scrap the oil deregulation law is to subsidize the petrol needs of Filipinos. That’s something we cannot afford to do and to do it is to upset the fiscal position that we now have that’s generating rating upgrades and attracting foreign investors. To remove or reduce the VAT on petrol will result in the same worse scenario of wreaking havoc on our fiscal position. The ANAYchists simply want to provoke a revolutionary situation.

esposo might not be wrong about “a revolutionary situation,” bully for the youth activists.     but he is wrong about everything else.  “subsidize”?  we have always paid, we will continue to pay, hangga’t kaya — it’s not as if we have a choice — but please, without all the patong, that is, taxes upon taxes.  and what foreign investors?  given our high power rates mismo (no thanks to EPIRA and VAT) and poor infrastructure, among many other unattractive features, all we ever attract is “hot money” (pang-stockmarket lang) that goes out as quickly as it comes in, the foreigners and local elite laughing all the way to their banks, without any real positive effect on the economy on the ground.

as for credit rating upgrades — highly desired because it allows government to borrow more and more, again and again, from foreign creditors, borrowing and spending, beyond our means, and nothing much of significance to show for it except a ballooning foreign debt.  upgraded credit ratings are based on enhanced capacity to repay loans, that is, based on increased revenues.  yeah, right, at our expense, an imposition, no less, of an obscene 12% VAT on essential petroleum products and electricity (hitherto VAT-exempt, it bears repeating), on top of other taxes (it bears repeating).

this email addendum to When VAT on oil is “crooked road” (thanks, rudy coronel) explains further why arroyo then was, and aquino now is, loathe to give up VAT on oil.  after all, it’s like, you know, a la juan tamad: without having to lift a finger, cash comes rolling in, never mind where it’s coming from.

Petroleum products are perhaps the single biggest source of taxation in this country. This country consumes 300,000 barrels of oil per day. There are 159 liters to a barrel. Local oil prices are now about P60.00 per liter for premium gasoline; P45.00 per liter for diesel. While there are other oil grades in the marketplace, gasoline and diesel together comprise the biggest slice of the whole cake. From this alone, you can imagine how much Vat oil products contribute to the country’s coffers. Add to that the excise tax (about P4.50 per liter for gasoline, of course lower for other grades) and the customs duties due on imported crude and finished oils. This is the reason why P-Noy, and even GMA in her time, will be, and had always been, reluctant to give up the Vat on oil. The thing is we have the highest Vat in the region, and yet I’m sure, were it not for the continuing rise in the global prices of oil, we might wake up one day with another proposal to increase the Vat rate. Vat, kasi, is one of the easiest taxes to collect. But Vat, you will be surprised, do not exist in the US, where tax collection is relatively more efficient. Vat is common whenever and wherever there are problems in tax collection, like in these parts. The irony is, year in and year out, we are not unlike a golf ball stuck in a sand-trap, unable to rise up from our budget deficits. My take on this is, throughout our history we have tried, but vainly, to solve our budget woes by imposing newer and newer taxes. At least for once, why can’t we try another strategy: trim down our expenses and manage our budget more responsibly?

here’s an elected congressman who’s talking sense, too, no less than san juan rep jv ejercito, more power to him:

At the House of Representatives, San Juan Representative Joseph Victor Ejercito has filed House Bill No. 6014 exempting petroleum products from the 12-percent VAT to provide immediate relief to motorists.

Ejercito, chairman of the House committee on Metro Manila development, said classifying petroleum among the VAT-exempt products was a more efficient and effective alternative to the government’s subsidy program, the Pantawid Pasada Program, which gives public transport owners discounts on their fuel purchases.

“Neither the bus, jeepney and taxi operators nor drivers agrees it is the solution to the skyrocketing cost of gasoline, diesel, kerosene and LPG. It does not benefit the people at all,” he said.

On concerns of the government that removing the VAT would reduce tax collections, Ejercito claimed that the government’s share from the

P45-billion annual income of Philippine Amusement and Gaming Corp. (Pagcor), P31-billion income of Philippine Charity Sweepstakes Office (PCSO) and P43-billion royalties from the Malampaya gas project would be “sufficient to replenish the lost revenues.”

Ejercito noted that the VAT was imposed in 2004 to boost revenues and lower the government’s dependence on borrowings that were pegged at 78.2 percent debt to the gross domestic product ratio. With the debt-to-GDP ratio falling to 55.4 percent, Ejercito said it was time to reconsider the VAT as it has already served its purpose.

so, again.  it is not true that gov’t is helpless on rising oil prices.  the president can drop VAT, which would bring down prices all around, give some measure of relief all around.  yes, this would reduce government’s resources but, like coronel and jv say, there are other sources, and there are other ways of raising revenue.

i would add: improved tax collections from the rich, the moneyed classes who are masters at, and get away with, undervaluing their assets and understating their incomes (as can be sensed from the corona trial); a rational debt policy — let’s not rush to pay obligations in advance just so we can borrow again — the nation is lubog na sa utang as it is.  and what about the pork barrel, and the presidential coffers — it’s time our government officials stopped enriching themselves while-in/through-their offices, augmenting their salaries with huge allowances and other emoluments, as though the money weren’t urgently needed elsewhere.

”yun nga lang, the president would have to rise to the challenge, demonstrate some creativity, perspicacity, and balls, so to speak.  and yes, william esposo, it would amount to a revolutionary situation of sorts, one that the masses would happily support, for sure, as in people power, remember?  revolution can be fun in the philippines.


When VAT on oil is “crooked road” #noynoying

Rudy L. Coronel

Let us please get real! The repeal of the Oil Deregulation Law will not cure our oil price woes. It will only throw us back to the bad old days when government required documents before approving every price increase proposal. Still, the oil prices increased—the only difference was that it took some time to take effect, simply because the government had first to evaluate the oil companies’ price-hike claims. In other words, it is not as much a regulated or a deregulated oil industry atmosphere as the relative volatility of the global prices of oil that causes our oil price woes today.

Methinks a comparatively more practical recourse would be to repeal the value-added tax law. Indeed, for every centavo increase in the local price of oil, the public unduly suffers, yet the government virtually rejoices because of the extra one-twelfth of a centavo automatically added to its coffers. Alas, there can’t be anything more ironic, or a road of governance more crooked, than that!

One recalls that when the VAT law was introduced, several basic consumer products and services were VAT-exempt, including food, medicine and petroleum. Truth is, government finds in the VAT system the perfect and easy solution to its tax collection inefficiencies. But here’s the rub: Its tax collection deficits continue to grow from year to year, so much so that medicine and petroleum have been delisted from VAT exemption. Worse, the tax rate which began at 10 percent is now 12 percent—in fact, the highest in the region. Alas, when can government learn to moderate its tax greed, which nonetheless has failed to eliminate its yearly tax collection shortfalls?

UP economics professor and former Budget Secretary Benjamin Diokno recommends a lowering of the VAT rate on oil from 12 percent to 10 percent. With due respect, I don’t think that’s enough! It would be probably fine if applied to all products, but definitely not with respect to petroleum products alone, which should rather be totally VAT-exempt. For two commonsensical reasons: First, petroleum products were originally (under the old tax code) exempt from VAT, and precisely because they were then already subject to excise tax. They still are today—a clear case of double taxation. Second, let us eliminate the tax collection bonanza that government automatically gets, while the public suffers, whenever oil prices go up. I must submit this is generally true for all commodities subject to VAT. But then, I seriously doubt that there is any article of commerce in our midst and times whose price behaves as wildly, uncontrollably and frequently as petroleum products do.

A zero-VAT on oil is, of course, going to be a big drain on the government’s revenues, given the volume of oil business this country has. But sheer business volumes are irrelevant here. Aren’t there, all told, more agricultural, marine, livestock and forest products in the market? And they are all VAT-exempt! Well, there are many ways to skin a cat. It is high time government learned to manage its finances more sensitively and less irresponsibly.