Lotilla confident SC will lift TRO on EVAT

Energy Secretary Raphael Lotilla has expressed confidence the Supreme Court (SC) will lift its temporary restraining order(TRO) on the implementation of what it earlier deemed as the unconstitutionality of the expanded value-added tax (EVAT).

"The Executive Department remains confident of its positon that the EVAT Reform Act is constitutional and the TRO should be lifted at the soonest possible time," said Lotilla.

Lotilla, who attended the SC hearings, observed that some justices were concerned about the lack of a massive information drive to properly inform and enlighten the general public and the business community on the implications of the EVAT.

"Now I understand better why the SC issued the TRO immediately. We take heed of the High Tribunal’s concerns and I am confident that as soon as the TRO is lifted, we would have a comprehensive nationwide information campaign on the impact of the EVAT Reform Act," he said.

He stressed that government will lose an estimated P130 million in revenues a day without the EVAT. If the TRO will hold until the end of the year, he said, the government is expected to incur huge losses of P25 billion to P28 billion up to end of 2006.

The energy sector, particularly petroleum products, are subject to EVAT for the first time under the EVAT Reform Act.

Lotilla said earlier that EVAT will not redound to runaway prices of petroleum products and that local pump prices will rise by an average of only six percent, sparing consumers the full impact of the 10 percent EVAT on petroleum products.

"We have several mitigation measures in place to mitigate the new tax law so that the expected increase in fuel prices should be minimal. Simulations that we made with the Department of Finance and the Bureau of Internal Revenue show that the impact will only be six percent instead of 10 percent," said Lotilla.

To offset the EVAT, the government also scrapped the excise taxes and reduced import duties on oil products.

Thus, diesel prices should only rise by 1.9 percent or 55 centavos per liter.

Kerosene, used for lighting and cooking by both marginal urban and rural dwellers, should only be hiked by 5.9 percent or P1.73 per liter This is the result of the removal of the 60-centavo per liter excise tax and the 50-centavo reduction in import duty.

For fuel oil, used mainly for power generation, the effect of the EVAT will result in a P1.20 per liter increase or 6.5 percent with the removal of 30 centavos per liter due to excise tax removal and another nine centavos per liter with the reduction in import duty.

Regular unleaded gasoline will increase by 6.8 percent or about P2 per liter following the scrapping of the 45-centavo per liter excise tax and 40 centavos per liter from the reduction of import duty.

Liquefied petroleum gas or LPG, used by households for cooking, will increase by 7.7 percent or P29.87 per 11-kilogram cylinder.

Lotilla said the highest impact of EVAT will be on unleaded gasoline with its pump price rising 8.6 percent or P2.60 per liter.

The simulations made however, do not include changes in the prices of crude in the international market.