Philippine Gov't protects big oil firms over consumers with tariff cut

By imposing tariff cut recently, the cash-strapped Arroyo government has
not only failed to address high pump prices but defaulted on its
responsibility to collect revenues, all in favor of the oil companies.

Government had already imposed tariff reductions in the wake of high
prices through Executive Order (EO) 527. The automatic tariff mechanism
imposed under the EO may be viewed as a compromise after government
removed VAT exemptions on petroleum products. The VAT on petroleum
products has since become one of the largest sources of revenue for the
cash-strapped Arroyo government.

Under EO 527, the current oil tariff scheme of 3% would be lowered to 2%
up to 0% based on certain triggers indexed to oil prices in the world
market. The expectation was that the tariff cut would soften the impact
of global oil prices on the economy. Under the EO, government had
reduced the tariff on oil products at least twice, but the move has not
had the desired effect. Instead of addressing high oil prices, it only
delayed price hikes on diesel by several days while easing the tax
burdens of the oil companies.

By choosing to remove tariffs on oil im****ts as a solution to high oil
prices, government is protecting the interests of the oil firms at the
expense of potential revenues that should be used to fund vital social
services such as health and education, said IBON executive editor
Rosario Bella Guzman.

A more effective solution to the problem of high oil prices would be the
lifting of VAT on oil products, she said. But the only permanent
solution to high oil prices is nationalization of the local oil
industry, starting with the repeal of the oil deregulation law. The oil
industry is vital to the country's economic development, and as such
should be regulated by government, said Guzman. (end)

IBON Foundation, Inc. is an independent development institution
established in 1978 that provides research, education, publications,
information work and advocacy sup****t on socioeconomic issues.

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