The World Bank, in its latest quarterly report on the Philippines, recently proposed that government increase the current excise tax of P4.35 per liter imposed on gasoline products to ensure a quality implementation of Arroyo’s fiscal stimulus plan and address a ballooning budget gap.
According to the multilateral lending institution, its proposal would “improve the progressivity of the tax system as petroleum products are disproportionately consumed by the richer citizens”. In other words, it is acceptable to hike current taxes imposed on gasoline products because the poor will not be hurt.
The World Bank, a global institution controlled by the US and other rich countries, has become increasingly discredited and notorious through the years. For a brief discussion on how it works to intensify global poverty, as told by a former World Bank “insider” – its former Chief Economist Joseph Stiglitz – watch the short video below.
With just a little over two weeks before Mrs. Gloria Arroyo deliver her supposedly farewell State of the Nation Address (SONA), I expected Malacañang to issue an outright rejection of the World Bank proposal. Severely wanting in favorable public opinion and amid persistent allegations of overpriced petroleum products, a categorical “no” from government would have been at least a positive public relations move.
But Finance secretary Margarito Teves, while acknowledging that the World Bank proposal is untimely, said that his department is seriously studying the suggestion and implied that if the World Bank can convince them, they might increase the gasoline excise tax, albeit in a proper time. Maybe after SONA?
There are two points I wish to raise here. One, petroleum products in the country are already artificially and unjustly high due to onerous taxes such as the 12% value added tax and overpricing especially by the Big Three (Petron, Shell, and Chevron) oil cartel. Further increasing gasoline prices through a higher excise tax will further aggravate the injustice and abuse that consumers already suffer.
Two, it is not true that the poor will not be hurt. It has been the recurring argument of Malacañang in its efforts to justify the continued imposition of the 12% VAT (which incidentally, Arroyo worked hard to increase from 10% to the current 12% starting in November 2005). But studies we made at Bayan point to the contrary. For instance, in the case of gasoline products, private car owners are not the only ones who will bear the impact of an excise tax hike. Tricycle drivers and small fishers using motorized bancas who also use gasoline products for their livelihood will be hurt more.
These people barely earn enough to meet the daily needs of their families and every centavo that will be added to their expenses will certainly make their daily existence much harder. At present, almost 600,000 tricycle drivers nationwide directly pay government P9.42 per liter in taxes on unleaded gasoline, representing the 12% VAT and the current excise tax of P4.35 per liter. Such taxes are already burdensome for them as they consume an average of 4 liters a day and thus pay government almost P38 daily in taxes.
Similarly, some 700,000 small fishers using motorized bancas directly pay government P9.10 per liter in taxes on regular gasoline, representing the VAT and excise tax. Per fishing trip, a fisher consumes as much as 10 liters and thus pay government almost P91 daily in taxes.
The World Bank, together with its twin the International Monetary Fund (IMF), has significantly shaped the country’s fiscal policies over the decades. It has strongly supported and pushed for more and higher taxes including the VAT to ensure that government would be able to service its debt obligations. At the same time, the World Bank has firmly opposed policy reforms to control the prices of basic goods and services such as the repeal of the Oil Deregulation Law. It has pushed for lower government spending on social services and promoted the privatization and commercialization of such services.
The people must oppose this latest policy dictate (cloaked as “proposal”) of the World Bank. The burden of addressing the budget gap and raising tax revenues should not fall on the shoulders of the poor. The 12% VAT on oil products must be scrapped and additional revenues should be generated through efficient tax collection, curbing corruption and smuggling, arresting the biggest tax evaders which are the corporations, and re-imposing the eliminated or reduced tariffs on imported goods.