VAT reduction pushed to ease oil price shocks

A day after the oil companies raised pump prices, militant lawmakers on Saturday called on the Independent Oil Price Review Committee to mitigate the price “shocks” on consumers by halving the value added tax on oil from 12%. By reducing the VAT on oil, the government could cushion the impact of rising fuel cost and the ensuing price spiral on consumers.

“Even if the industry is deregulated, the government can reduce the taxes on oil, just like they do in other countries that have lower VAT rates for basic utilities and products” said Teddy Casiño of Bayan Muna party list.

For her part, Rep. Emmi de Jesus of Gabriela scored the oil firms for throwing away all restraint and coldheartedly raising prices with the Aquino administration giving its consent.

Citing a study by the Bagong Alyansang Makabayan, Casiño said that since the oil industry was deregulated in 1999, the upward movement of local oil prices were quick and often exceeded the movements in global oil prices and foreign exchange.

In contrast, he said the downward movement was slow and often small in proportion to the decrease in global oil prices and foreign exchange. He revealed that under such a scheme of multiple overpricing, from January 1999 to March 2012, local oil companies have been able to accumulate an overprice of as much as P7.86 per liter for diesel and P16.18 for gasoline.

The study, Casiño said, was based on the monthly movement of Dubai crude and foreign exchange (forex) rate based on a rule of thumb used by one major oil firm that pegged the movement of local prices at around P1 per liter for every dollar change per barrel of oil and around P.30/liter per peso change in the forex.

For her part, Gabriela Rep. Emmi de Jesus slammed the Aquino administration for being powerless over the decision of the oil companies to raise their pump prices.

“It is a great disservice to the Filipino people who are already overburdened and stumbling from reeling prices after the recent floods and amid massive unemployment and depressingly low wages,” de Jesus said in a statement.

“People in calamity-stricken areas are yet to recover from floods due to heavy monsoon rains two weeks ago but oil companies threw away all restraint and coldheartedly increased oil prices,” she said.

She said the ‘weak’ Aquino administration’s dependence to recommendations of the Oil Price Review Committee has allowed ‘greedy’ oil companies to hold the government hostage as far as the pump prices are concerned.