Philippines: No Suspension of Oil Import Tariff, VAT

President Aquino is not in favor of artificially lowering the prices of fuel and other oil products by suspending the expanded value added tax (VAT) on these items or the tariff on imported crude.

He said direct subsidy through the distribution of smart cards to tricycle and jeepney drivers would be the best relief the government could provide to the public transport sector.

"In your view and those you were able to talk to, it (fuel subsidy) would not be effective," he said.

"But the opinion of those that the DOTC (Department of Transportation and Communications) among others, we're able to talk to, as well as the LTO (Land Transportation Office), LTFRB (Land Transportation Franchising and Regulatory Board), this would help."

Procedural matters that must be completed before smart cards can be distributed, he added.

Aquino said the suspension of VAT on oil would hit the government two-pronged.

"Number one, the proceeds that we earn from the VAT will be lost," he said.

"This is easily about a billion per month, that's the minimum estimate. The billion can go in so many things, it's additional revenue for the state that we will forgo.

"The other aspect that is fundamental is, if the (prices of some commodities) that are not essential are increasing, you will lessen consumption of these."

Aquino said in the case of essential products like crude, consumers would tend to be conscious in using them and would purchase whatever would fit their needs if the prices were high.

"You will be very conscious not to waste anything," he said.

Aquino said if the low prices are artificial, consumers would lose their motivation to save, and in suspending taxes, suppliers might also import more than what was being demanded by the market.

"In the end, it will not be of any benefit to the state," he said.

"It's like we spent something and did not get anything from it. So in our view, it is better to make sure and encourage conservation.

"We really have no control over the prices of crude in the world."