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Monday, May 01, 2006
Speak Out: Exploiting oil tax cut
By House Deputy Majority Leader
Eduardo R. Gullas
(Cebu, 1st district)
IF THE government cuts any oil taxes, oil refiners and importers would surely exploit the resultant tariff differential to further increase margins by jacking up prices at the pump.
Our concern is that in the absence of a significant and definite benefit to end consumers, any tax cuts on oil will just give oil companies greater leeway to expand margins, this time not only at the expense of consumers, but also at the expense of much-needed government revenue.
I was reacting to government’s plan to temporarily reduce the tariff on imported oil from three percent to just one percent, a move that the Department of Finance said would presumably reduce pump prices by 50 centavos per liter.
This is ridiculous. What’s the point if we effectively cut oil taxes by 50 centavos per liter today, only to have this countered tomorrow by the oil firms increasing their pump prices by P1 per liter? Can regulators do anything to prevent oil companies from doing this?
Our point is that a costly tax reduction should have tangible benefits to consumers. Otherwise, there’s no point pursuing the cut.
Reduced oil taxes would not provide meaningful relief to consumers at this time when oil companies are enjoying tremendous pricing power at the pump owing to the continuing global surge in oil prices.
If at all government must cut oil taxes, it must do so only after oil prices abroad have stabilized over a certain period, or have started going down. This way, oil companies will have no excuse whatsoever to further raise pump prices. Timing is crucially important.
Crude oil touched a high of $75.35 per barrel in global markets last week. This prompted government to initially consider the temporary suspension of the 12 percent value-added tax (VAT) on petroleum products in order to cushion consumers. Officials, however, have since withdrawn the plan.
I opposed the temporary suspension of the VAT on petroleum products for the same reasons I am rejecting the proposed oil tariff cut.
Two weeks ago, another member of Congress revealed that the country’s two oil refiners—Petron Corp. and Pilipinas Shell Petroleum Corp.—amassed a whopping P11.8 billion combined after-tax profits in 2005. This was up P5.54 billion or 88 percent from the P6.26 billion in aggregate after-tax earnings they posted in 2004.
For Bisaya stories from Cebu. Click here. (May 1, 2006 issue)
Write letter to the editor.Click here.
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