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Friday, September 23, 2005
Oil dealers to decide on prices despite R-VAT
Since the country’s oil industry has been deregulated, the government would merely rely on the dictates of the conscience of petroleum dealers with regard to the possible increase in the prices of petroleum products once the value-added tax reform (R-VAT) law will be implemented.
R-VAT has removed the VAT exemptions previously enjoyed by petroleum products as well as power, electric cooperatives and air and sea domestic transportation, among others.
Additional
The R-VAT law also placed a 70 percent cap on input tax for the credit of companies.
This means oil dealers will incur additional operating costs.
But Finance Undersec-retary Emmanuel Bonoan said the government has prepared mitigating measures, such as the removal of excise tax on socially sensitive products, like diesel, which is used in public transport, kerosene, which is used as light in the countryside, and fuel oil, which is used for power generation, to offset the additional cost of the R-VAT to oil dealers.
He said during the road show on the VAT reform bill at the Waterfront Cebu City Hotel and Casino recently that the government expects oil dealers to use the savings they will make from the removal of the excise tax to compensate for the additional cost on their operations due to the R-VAT.
“We expect (the effects of) the reduction in excise taxes to trickle down to the consumers,” Bonoan said.
bNo control
But he admits there is no specific provision in the R-VAT that controls the pricing scheme of the oil industry.
In the same event, Department of Energy (DOE) Undersecretary Melita Obillo assured oil dealers in Cebu that the DOE “has no hand in their pricing scheme.”
“You are a deregulated industry. You can price your products on your own. The DOE has nothing to do with it,” she said.
Obillo was reacting to the appeal of Perla Capang-pangan, who is said to be a representative of Caltex and Petron dealers in Cebu, not to implement the 70 percent cap on input taxes as this will result in the decline of their already low profit margin of three percent.
Input tax refers to the VAT due on or paid by a VAT-registered person or entity on importation of goods or local purchases of goods, properties or services, including the lease or use of properties, in the course of trade or business.
With the R-VAT law placing a cap of 70 percent on the input VAT that companies can claim as credits, businesses will be forced to either absorb the cost of the VAT or pass it on to consumers in the form of higher prices.
But other mitigating measures to the R-VAT are the reduction of excise tax on regular unleaded gasoline and the reduction of import duties on crude and petroleum products from five percent to three percent. (JBN)
(September 23, 2005 issue)
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