House think-tank sees VAT on oil hitting P70 billion this year

MANILA, Philippines - Higher oil prices could raise revenues from value-added tax (VAT) on oil to P70 billion this year, significantly higher than the projected P43.9 billion VAT collections on oil products for 2011, according to the Congressional Policy and Budget Research Department (CPBRD), the think-tank of the House of Representatives.

“Under the Budget of Expenditures and Sources of Financing (BESF) for fiscal year 2011, the government projected VAT collections on oil products to the tune of P43.9 billion. However, taking into account the prevailing scenario of higher oil prices and assuming that this trend were to remain for the rest of the year, the CPBRD reckons VAT revenues on oil would increase to roughly P70 billion for the same period. This would translate to a windfall of around P26 billion for 2011,” it said.

As such, the CBPRD said revenues from VAT on oil could be used for infrastructure and social services, better than providing subsidies, which are deemed temporary in nature.

“Instead of fuel subsidies, the CPBRD reckons that the estimated VAT on oil windfall can be better used to fund infrastructure projects and other social services that can possibly create additional jobs, enhance productivity and induce broad-based economic growth,” the CPBRD said.

Last year, the government generated P45 billion from VAT.

In terms of oil monitoring, the CPBRD said the government can strengthen this by introducing amendments to the Oil Deregulation Law so that the government can transfer the functions of the Department of Energy-Department of Justice to the Department of Justice Office of Competition to safeguard the possibility of regulatory capture.

To further ensure that the downstream oil industry would be strictly monitored, the government can also establish an independent competition authority.

“Instituting the correct policies which would reintroduce the use of renewable yet viable energy in the transport sector should also be reconsidered as this would possibly minimize the country’s dependence on oil while providing a more environment-friendly energy source,” the CPBRD said.