Congress wants to give President Aquino emergency powers to deal with the power crisis in Mindanao. I am from Mindanao myself and believe that no amount of emergency powers will immediately solve the crisis. It takes 3-4 years to build power plants. The best that could be done under the present circumstances is to station power barges. The downside is that these barges use diesel to generate electricity, and considering the fact that fuel (including diesel) prices are on the rise, the cost of electricity in Mindanao, which is already very high, will go up even more.
There is a far worse crisis than the power crisis in Mindanao—a crisis that has brought economic difficulties to Filipinos nationwide: the unabated increase in oil prices which has pushed inflation up. Transport fares have gone up and so have prices of basic goods and commodities. Labor groups are restless and demand an increase in minimum wage. Compounding the problem is the plan of private schools all over the country to raise tuition fees when they open this June. Dropout rates among the youth are expected to rise as well.
Congress should grant President Aquino emergency powers to address not the power crisis in Mindanao but the problem of increasing oil prices.
With emergency powers, he can suspend the Oil Deregulation Law and impose windfall taxes to recover the billions of pesos in interest earned by oil companies from the VAT payments of consumers. The amount of interest earned by oil companies from VAT is enormous. Using 2009 figures available from the DOE website (2010 and 2011 are unavailable), oil consumption (of all petroleum products) is about 43 million liters per day. Assuming the average VAT (for all products) is P4 per liter, the amount of VAT payments received by oil companies is about P172 million per day. Since the VAT is remitted every 20th day of each month or a 30-day interval, the VAT received by the oil companies on the 21st day, assuming it is placed on a 30-day time deposit of 15-percent interest rate, would earn an interest of P26 million. The VAT payments on succeeding days are also deposited and earn interest and the interest themselves earn interest because only the VAT payments are remitted to the government. This definitely gives oil companies a windfall.
With windfall taxes, the President can reduce the VAT from 12 percent to 10 percent without loss in government revenues from oil.
He can also consider reducing the VAT for diesel to be used by those power barges to even lower than 10 percent to ease the effects of the power crisis in Mindanao.
It is of course not only the oil companies that benefit from the VAT interest but also companies in other industries. President Aquino should order a thorough review of the VAT law to plug the loopholes that cause this massive leakage in government revenues.
For the oil industry, a shift to the specific tax system should be seriously considered because of its many advantages to the government and the consumers over the VAT system. (Please refer to my letter to the editor, “Untaxed hidden income of oil companies,” Inquirer, 3/29/12)
—ERNIE ADAYA,
ernie_adaya@yahoo.com