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IT seems
the local bourse is between a rock and a hard place. The
Philippine Stock Exchange (PSE) wants the government to
adopt more market- friendly policies and laws rather
than scrapping or reducing the value-added tax (VAT)on
gasoline prices.
At the
same time, it recognizes the need for urgent action on
the crisis in fuel since the very high gas prices also
hurt the stock market where, since gas prices had become
pronounced this year, it had lost at least P1.11
trillion in the value of its total market
capitalization.
So what
to do? PSE chief executive Francis Lim said, “What we
need are new and strategic rules and policies that will
encourage the buildup of more business enterprises,
which, in turn, will increase productivity and help our
people earn more to meet their growing needs.”
“The
stock-market slump definitely affects investors. But
over and above its effect on investors, the stock-market
retreat also upsets the ability of our listed companies
to create jobs, because the slump also affects the flow
of fresh capital that these companies need for their
expansion plans,” added Lim.
He said,
though, that scrapping the 12-percent VAT on oil
products is not the answer.
“If the
government scraps or reduces the VAT on oil products, we
do anticipate more problems to confront us and our
people, especially the poor wage earners. That’s because
scrapping or reducing the VAT on oil products will
deplete government coffers; and, in the process, it will
hamper government’s ability to deliver much-needed
social services,” he said.
The
government’s campaign to attract investments will
likewise suffer, because investors as a whole do not
trust a government that does not show the political will
to maintain consistent economic policies and to manage
its finances.
When the
government was finalizing the details of the expanded
VAT in late 2005, Lim said the market experienced some
volatility. The main index suffered a pummeling in July
2005 when a temporary restraining order was issued by
the Supreme Court on the effectivity of the E-VAT
pending the resolution of constitutional questions
raised against it.
“But the
main index recovered when the expanded VAT was finally
implemented in November 2005. Likewise, when reports
came out about government plans to scrap the expanded
VAT on oil and petroleum products in April 2006, the
stock market experienced net foreign selling, which was
immediately reversed when these reports were denied,” he
said.
Meanwhile, the public relations adviser of former
President Fidel Ramos pushed for the urgent need to
temporarily suspend the revised value added tax (R-VAT)
for crude oil with the forecast that oil prices in the
world market would continue to increase in the next
months.
Appearing the weekly Tinapayan news forum, Ed Malay
reminded the public that there was already a bill
pending at the House of Representatives for the
suspension of R-VAT for crude oil.
“As far
as oil/crude is concerned, we are dependent on the world
market. And the increasing oil prices are beyond our
control. So, in my opinion, the remedy is for the
temporary suspension of R-VAT be it partially or as a
whole,” said Malay.
“The
suspension is only temporary and once the prices of oil
in the world market stabilize, the government can
re-impose again the R-VAT,” he added.
But
since R-VAT is a law, only another law that can
supersede, amend, or altered it. “There is already a
bill pending in the House, what we need is to
immediately pass it in the Congress and President Arroyo
should notify it as urgent measures,” Malay said. |
