Wage hike, lower VAT considered

MANILA, Philippines—A wage increase, price controls and a reduction in the 12-percent value-added tax (VAT) on goods and services are among the measures that Malacañang is considering to help people cope with soaring oil prices, President Benigno Aquino III said Wednesday.

The President said he had instructed his economic managers to study all means to mitigate the impact of high fuel prices on the poor and wage earners.

Transport fares, power rates, food prices and toll rates have also gone up.

Mr. Aquino said he expected his economic managers to be ready with their presentation by next week.

“Everything is being studied. Will it be a wage increase? Can it be a price control or can we reduce the VAT? So, true solutions—not measures that would make us look good—are being explored,” he told reporters after attending the signing of an agreement between the Department of Budget and Management and the Judges’ Association granting judges a pay raise.

Mr. Aquino said the first measure that his economic team had implemented to help people cope with the effects of high fuel prices was the fuel subsidy to jeepney and tricycle operators.

The President said he wanted the measures to benefit the “sectors that needed these most.”

“Those (sectors) who are better off, we can help them later on. But those who are most affected should be the ones to be given assistance,” he said. “We can only do that if our programs are focused on them.”

Mr. Aquino said the government was capable of providing “some solutions to the problem that no one had foreseen and no one can predict would end.”

Malacañang released on Tuesday the executive order providing for a P450-million fuel subsidy, paving the way for its implementation before the end of the month. The subsidy is equivalent to not less than P2 a liter, according to the Department of Energy.

Good news

The President said people would be hearing “a lot more good news” about the economy and public finances in the next few days.

Asked if he was open to reducing the rate of VAT, Mr. Aquino said he just wanted to find out the effects of the tax being cut from 12 percent to 6 percent.

The President said that should Congress pass a law reducing the VAT rate, the move would lower revenues that the government needed to fund its programs.

“In general, (reducing the VAT) is not the right solution,” he told reporters.

Cool to ideas

But Budget Secretary Florencio Abad later told reporters that the economic managers were “not keen” on recommending proposals to reduce the VAT or imposing price controls.

Abad said the economic team would propose measures aimed at providing assistance “directed at the poor.” The measures, he said, should not adversely affect the budget as much as possible.

“The general reaction of the economic managers (on the proposal to reduce VAT) was it would impact adversely on the fiscal position of the government apart from the fact that it would not target the sectors that needed it most,” said Abad, who was with Mr. Aquino at the signing ceremony.

Second look

The budget secretary said the President told the economic team to “still take a second look” at the proposal to cut the VAT rate.

On price controls, Abad said that such a measure “could lead to scarcity in supply” of goods.

“There’s a bit of concern there, although we’re not completely closed to those. Our experience in the past showed that those measures generally had really not worked that well,” he said.

Wage increase

The budget secretary said the economic managers were studying the proposal for a wage increase for the private sector.

“As a matter of principle, the President understands that private sector employees are carrying a burden. Because we are currently implementing the third phase of the Salary Standardization Law, government employees are enjoying adjustments in their pay,” he said.

Direct cash considered

Abad said the economic team also would consider cash and noncash measures.

“Some are likely going to be cash payments with bias toward providing direct assistance to the poor or those who are going to be hit hard. Concerns about food prices, for example, are very high on the President’s mind,” he said.

Abad said Mr. Aquino wanted the measures to be ready soon.

“(The President) said the situation continues to be uncertain and he doesn’t want the people to continue to face uncertainty here and have additional burden,” he said.

Abad said the measures the economic managers would be recommending to the President were short-term ones.

“We are just hoping that the political instability in the Middle East and North Africa will settle down soon,” he said.