President Arroyo has ordered the increase of the direct cash subsidies to the poor using portions from the coconut levy funds and proceeds from the Malampaya gas project in Palawan.
Press Secretary Ignacio Bunye said the President issued the order during the Cabinet meeting on Tuesday at the Palace in response to a proposal of industrialist Raul Concepcion to reduce the value-added tax on diesel by six percent for a limited period to ease the effects of rising prices on the poor. Diesel is the fuel used in public transport, particularly jeepney and buses.
He said the move would be “revenue-neutral” and would not send the wrong signal to foreign investors and creditors that are closely monitoring the country’s fiscal condition.
Finance Secretary Mar-garito Teves estimated the government would lose at least P4.3 billion per quarter if the VAT on oil products would be reduced by six percent, he said.
“So the President said why don’t we just collect that (VAT on diesel) and give the equivalent in subsidy to targeted beneficiaries,” Bunye said, adding that tinkering with the VAT could send the message that the government is not serious in its fiscal reforms.
“We have to be consistent in our fiscal reforms,” he said, adding Teves insisted during the Cabinet meeting on fiscal discipline.
He said Mrs. Arroyo identified the coconut levy funds and the National Government’s royalties from the Malampaya project as sources of the subsidies for the poor. The National Government earns some P3 billion annually from the Malampaya project, he said.