Tuesday, January 15, 2008 Cabaero: What tariff cut on oil products? By Nini B. Cabaero Beyond 30
CEBU officials are set to join the fray for the lowering of tax on oil products as a way to help Filipinos cope with financial challenges.
Two Cebu provincial legislators are set to introduce a resolution expressing support to President Arroyo’s decision to reduce tariff on imported crude oil.
The President ordered a one-percentage point reduction in the tariff on oil imports “as part of the mitigating measures on the rising world oil prices,” reports said. This would lower the oil import tariff from three to two percent.
But critics said such reduction would have no impact on fuel prices and on consumers. If the purpose of the order is to mitigate the effects of rising worldwide crude prices, then there is little or no benefit to the Filipino consumer.
Decreasing the tariff on imported crude oil is not the same as reducing the value-added tax of 12 percent that government is imposing on oil products.
Despite widespread calls for the reduction or suspension of the 12 percent value-added tax, there is little hope this would happen as foreign lending institutions have advised President Arroyo against the move.
There are ways, not as painful for the government as tax cuts, which could lift some of the burden from the consumers’ shoulders. These are to ensure that oil price decreases are as efficiently and promptly implemented as oil price increases, and for government to impose a one-rate policy throughout the country for big oil players.
When oil companies announce a price increase to take effect at 12:01 a.m. of a particular day, you can be sure the price adjustment would happen as announced.
When oil companies promise to reduce prices of certain products at a certain time of a particular day, you would be lucky if your favorite gas station would implement the price reduction promptly. It usually takes time for the price reduction to take effect. The explanation by the gas station or outlet is that the order on the price change from the main office has yet to arrive. How come there is no such paperwork requirement when it comes to price increases?
This is usually the case, especially on prices of liquefied petroleum gas (LPG) that is vital to households.
Government could help consumers by ensuring that price decreases happen as promised. This would be a bigger help than the one percent tariff cut.
Another area where government could come in is in the setting of a one-rate policy on prices of fuel products throughout the country or a common price rate for the entire country by big oil players.
We know that Cebu pump prices, for example, are higher than those in Manila. The explanation is that oil companies have the added transport cost in bringing fuel to the provinces.
But the different prices make it difficult for consumers to determine the correct price based on proclamations made in Manila and in adjustments computed using the Manila rates.
A one-rate scheme for the entire country could make implementation of price decreases easier and demandable by consumers, without room for confusion or excuses of delays in transmissions of orders from main offices located in Manila.
Short of lowering further the oil tax, these are ways through which government could help ease the burden.
