Federico Pascual on Mar Roxas' plan

Here's an article from columnist Federico Pascual on Senator Mar Roxas' plan on urging the President to suspend the VAT on oil products:

Mar is right in moving for oil VAT suspension

MYOPIC VIEW: The Arroyo administration's main reason for opposing the suspension of the Value Added Tax on oil products is that the government will lose some P30 billion in one year.

That is a myopic view of consumer spending.

Suspending VAT collection on gasoline, diesel and other oil-based fuels will mean direct savings for utility drivers, motorists and households at the rate of more than P4 per liter for diesel and about P65 for every 11-kilo tank of cooking gas.

A jeepney driver who uses 25-30 liters of fuel every day will save P100-P120 a day or P2,200-P2,640 a month. Meanwhile, the government “loses” the VAT on that fuel.

But nobody loses anything. In fact, the government is actually a winner.

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SPENDING POWER: As pointed out by Sen. Mar Roxas, who is pushing for the suspension of VAT on oil products, the P100 or so that the driver saves each “pasada” day is not a real loss to the government.

That money will immediately go back into circulation. The driver and his family -- and the millions of others who will benefit from the price cuts -- will not hide the savings in a shoebox or open a bank account to start a lifetime pile.

The money is soon spent for other goods and services that, as the law dictates, are subject to 12 percent VAT. There is no escaping the tax. It is as pervasive and as obnoxious as air pollution.

Consider the cascading effects of further stimulating the economy by putting more money in the hands of consumers, instead of in the secret pockets of grafters.

With 25 billion liters of fuel consumed each year, imagine the extra spending power passed on to consumers and the taxes they will pay on other goods and services.

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