Monday, August 15, 2005

Glo To Defer VAT?

Arroyo advised: Defer VAT

Michael Lim Ubac Christine O. Avendaño
Inquirer News Service

AMID SURGING oil prices, an economic adviser has urged President Gloria Macapagal-Arroyo to defer the implementation of the 10-percent expanded valued-added tax should the Supreme Court lift the freeze order on the VAT law.

The tribunal is expected to lift the temporary restraining order this month.

Albay Representative Joey Salceda yesterday said that once the freeze order was lifted, "the administration will exhaust means to legally postpone the effects of the VAT reform law until global oil prices ease to $50 (per barrel) where we reckon it would be tolerable."

Implementing the VAT law will further raise the prices of fuel, electricity and a host of other products and services.

Salceda, one of the President's economic advisers, warned that at $67 per barrel of crude, the pump price of unleaded gasoline could easily exceed P40 a liter "even with mitigating measures."

Crude prices rose to $67.10 a barrel in New York Friday, up at least 60 percent since August 2004, prompting the Arroyo administration to urge the public to conserve energy.

But Rigoberto Tiglao, Presidential Management Staff chief, said last night that Salceda's proposal covered only fuel because of the oil crisis.

"No move on the executive('s) part," Tiglao said in a text message to the Inquirer, as he noted that the subject was still "moot and academic at this point since there's a temporary restraining order."

The Supreme Court suspended the implementation of the VAT law, the centerpiece of the President's economic reform agenda, on July 1 just hours after it took effect because of petitions seeking its nullification.

Tiglao said Salceda had offered his proposal only to Energy Secretary Raphael Lotilla. It was "very, very preliminary," the PMS chief said.

But Salceda, the House of Representatives' economic expert, said he had already briefed the President on the consequences of pushing through with the VAT. "She has not yet texted me back. My personal guess? She would be open to it."

He said the administration should not be cowed by the threat of another downgrade from credit rating agencies. "We just have to make a case. Let's not be too afraid (of them)."

Three international rating agencies -- Standard & Poor's, Fitch Ratings and Moody's Investors Service -- downgraded their credit outlook on the Philippines to negative from stable partly because of the freeze order on the VAT law.

A credit downgrade raises the cost of borrowing funds abroad.


Salceda said that while economic managers were "keenly sensitive to the market signals of a suspension" of the VAT law, "it would be fiscal folly, nay suicidal, to insist on its implementation at this point even if there were no political crisis."

The President is facing a widespread clamor for her removal from office over allegations of poll fraud. Impeachment complaints have been filed against her in the House of Representatives.

A top investment analyst in a foreign bank operating in the country last week said that record crude prices were a bigger threat to Ms Arroyo's survival than the political scandals she was facing.

The VAT law covers previously exempted products and services such as petroleum products, electricity, coal, natural gas and other indigenous fuels, sea and air travel, and medical and legal services.

It also covers cotton, cotton seeds and non-food agricultural products, works of art, literary works and musical compositions, and increases the corporate income tax from 32 percent to 35 percent.

"Even for one who is the most rabid fiscal hawk in government, I can't be oblivious to the oil price spike and its impact on consumer welfare and the general economy," Salceda said.

The lawmaker said that at $67 (per barrel of crude oil) plus VAT, "the inherent contractionary impulses would be so magnified as to overwhelm most of its beneficial impact."

Low deficit

Salceda explained that doing away with the VAT this year was feasible.

He explained that the projected deficit for the first half of the year was P97 billion, but the government had trimmed it down to P67 billion.

"A P30 billion baon (buffer from the) first half deficit (in lieu of) the P28 billion proceeds from VAT law in 2005, this would allow us to meet targets," said Salceda.

He was referring to the projected P28 billion in revenue to be generated this year alone with the inclusion of the power and oil sectors in the VAT net.

"Imposing the oil and power VAT at this point would do more harm than good and even upset our fiscal goals as it would stoke consumer pessimism," he said.

Even if the VAT law were imposed, the government would not get the projected revenue because of its contractionary effect on the economy, Salceda said. "At a certain point, consumers do cope (with rising prices). So there will be less spending."

To lessen borrowings, Salceda said the administration was selling assets like the Philippine National Bank and postponing projects with no automatic loan backing.

"We would focus on overseas development assistance utilization to afford support to aggregate demand. It's also a good time to rebuild the Malampaya stake and award exploration contracts," he said.

Supreme Court of the Philippines

Department of Energy (DoE)

Cruz's Column

As I See It : What's wrong with Mike Defensor?

Neal Cruz
Inquirer News Service

"WHAT'S happening to Mike?" a friend asked me last weekend. He was referring, of course, neither to Big Mike A nor Little Mikey, but to tiny Mike Defensor who is trying to look big in the eyes of President Macapagal-Arroyo. Mike Defensor it was who called a press conference last Friday to say that the "Hello Garci" tape presented by lawyer Alan Paguia was "not authentic." To prove his point, he presented a technical report by an American expert and a Filipino self-styled "audio expert."

"It is my opinion," reported the American "expert," one Barry Dickey, "based on the examination of the copy provided, that several anomalies exist which question the integrity of (the recordings)." Mike obviously expected to be hailed "a hero" for his efforts. Instead, he became a laughingstock. Even defenders of GMA (Gloria Macapagal-Arroyo) and, therefore, his allies, are laughing.

Rep. Prospero Pichay, one of GMA's staunchest defenders, dismissed Mike's report as "rubbish." "He (Mike) should be concentrating on the environment department's reforestation program instead of trying to prove himself a sound expert," Pichay twitted him, adding that the report has "no additional probative value." Paguia, reportedly the source of the tapes given to Dickey, had earlier admitted that he edited the tapes, Pichay said. The job of investigating the authenticity of the tapes belongs to the National Bureau of Investigation, not to Defensor, he added.

The NBI itself revealed that Mike's Filipino "audio expert" seems to be one of those "witnesses for sale," whose tribe has suddenly mushroomed here. According to an Inquirer story, the "expert," Jonathan Tiongco, had earlier presented himself as a witness to the NBI, but the NBI rejected him. Tiongco then gave his affidavit to reporters. When reporters asked him about the charges of murder against him, he replied that media should not look into that part of his life.

It was Interior Secretary Angelo Reyes who revealed that Tiongco was facing "numerous murder, estafa and extortion charges." Tiongco had earlier filed murder, kidnapping and graft charges against Reyes and anticrime crusader Teresita Ang See. Tiongco accused the latter of staging the kidnapping of Chinoys.

Tiongco had also presented himself to a senior Department of Justice official. "I sensed there was something wrong with him," the official said of Tiongco. "I called the NBI and they warned me against (believing) what he was saying."

Justice Secretary Raul Gonzalez, another staunch defender of GMA, said he himself was "reluctant to believe" Tiongco.

This shadowy past of Tiongco Mike Defensor either did not know or, knowing, disregarded. And so Defensor still decided to use him. Result: Nakuryente siya. (He got it wrong.)

"Mike is like the bullfrogs in that old fable," my friend said. "He is inflating himself to look bigger than the other frogs in GMA's pond. One of these days, he will just burst from too much hot air."

Mike's caper does look like an act of desperation. It is incredible why he wasted time and money (taxpayers' money appropriated to his department?) to fly to the United States and hire an American sound technician to examine tapes that—their source himself, Paguia, admitted—were edited.

The tapes were taken by Paguia from an original that played at least three hours long—the tape supposedly now with former NBI Deputy Director Sammy Ong. Paguia said he edited it and provided a narration to make the listener understand the contents better. Therefore, any technician will find them "not authentic." Elementary. Any damn fool will know that. Except Mike.

The other tapes that Sen. Panfilo Lacson and former Sen. Francisco Tatad had sent to Australia and the United States for examination have been declared "authentic." To remove any doubt, it should be the Sammy Ong tape that should be authenticated not just by any doohickey "expert," but by the Federal Bureau of Investigation or Scotland Yard.

But is that still necessary? President Macapagal-Arroyo herself has confessed that she talked on the phone to a "Comelec official" while the votes were still being counted. For that, she has apologized. Her own lawyer admitted that the official was Commissioner Virgilio Garcillano. Some Comelec officials have admitted that they were invited for dinner to the home of the President in La Vista, Quezon City. It was during this dinner, held before the elections—during which GMA reportedly asked the help of the Comelec officials—that GMA's kumare and kabalen, Lilia Pineda, wife of suspected jueteng lord Bong Pineda, distributed envelopes with money in GMA's presence, according to Michaelangelo Zuce. All the persons concerned denied Zuce's claim.

Even without Zuce's testimony, the mere fact that GMA invited Comelec officials to dinner in her home and talked on the phone to a Comelec commissioner—never mind what they talked about—is already a grave impropriety that makes her unfit to be President and bolsters the suspicion that she and others cheated in the last elections.

She was a candidate and anybody knows that a candidate talking to Comelec officials during an election is highly improper and unethical in the same way that a judge should not talk to a litigant with a pending case in his sala.

By the way, it is really the practice of GMA to invite people to lunch or dinner to ask for their help. Recently, as part of her media blitz to improve her public image, she invited Pampango journalists for lunch at Malacañang, during which she asked for their help. For ethical reasons, some of the journalists did not want to go, but they were persuaded by Malacañang flunkies to attend. GMA probably knew that the affair was unethical because the journalists were let in not through the front entrance but through a side door.