As House Committee on Ways and Means chairperson, Marikina City 2nd District Rep. Miro Quimbo expressed opposition to the proposed removal of the value-added tax (VAT) on fuel, warning that it could significantly affect government revenues and the country’s credit rating.
Energy Secretary Sharon Garin echoed his position, noting that the measure could cost the government an estimated P170 billion in foregone revenues annually.
“The estimate is about P170 billion per year in VAT, so that’s P170 billion per year lost to the government. It depends on the design, but it is also adjusted to petroleum price movements. Meaning, when prices go up, the losses also increase. It will also depend on what we want to achieve — whether it is on price alone or also on importation,” Garin said in a Palace press briefing on Friday.
Quimbo said that keeping the country’s high credit rating is crucial, as creditors use it to determine the interest rates they will impose on the government’s loans.
“When our credit rating is low, the primary impact is on our ability to borrow and repay obligations under favorable terms,” he explained, adding that it could lead to banks imposing higher interest rates on housing loans, car loans, and other personal or business loans.