Umbrella group Bagong Alyansang Makabayan (Bayan) slammed Malacañang for insisting on the 12 percent value added tax (VAT), saying that the Arroyo regime chose to listen to the International Monetary Fund (IMF) instead of the growing public clamor to suspend the regressive petroleum tax.

The IMF issued a statement the other day and claimed that based on its survey, the rich would benefit more than the poor from oil VAT suspension because the rich spend a higher portion of their income on petroleum compared to the poor.

Bayan described as illogical the IMF conclusion and argued that every additional centavo spent on oil puts far greater pressure on the poor’s income than the rich’s. This makes it meaningless to compare what portion of the respective income of the poor and the rich directly goes to oil consumption, Bayan maintained.

The group added that the IMF survey pertained only to the direct consumption of petroleum products and did not take into account the domino effect of high and increasing oil prices. A P1 per liter-hike in oil prices, for instance, increases the inflation rate by 0.10 to 0.14 percentage points after a 12-month period, according to the Bangko Sentral ng Pilipinas (BSP). This means that there is an overall increase in the prices of basic goods and services, which impact more on the poor than the rich.

The IMF conveniently ignored these facts because the oil VAT is its brainchild. It had been pressuring the national government to implement the said measure since the late 1990s to guarantee that the country has a steady and reliable stream of domestic revenues for debt payments, Bayan said.

Bayan pointed out that the IMF’s role in the international financial system is to ensure that borrower countries like the Philippines will not default on their obligations to creditors. Thus, the IMF insists on the oil VAT because, combined with the Oil Deregulation Law (which the IMF also imposed on the Philippines to access loans in the early 1990s), it easily increases government revenues. But all this is directly shouldered by the poor, who are forced to cope with exorbitant oil prices and high cost of living with meager income.

Reminding Arroyo that the government is accountable to the people and not to the IMF, Bayan said that continued adherence to IMF-imposed policies like the oil VAT only further de-legitimizes the regime. (END)

Reference: Arnold Padilla, Public information officer