SEN. Mar Roxas yesterday said he was counting on the energy summit called by President Arroyo to tackle his proposal to suspend the collection of the 12 percent value-added tax on oil products for at least six months.

"It’s the job of government to reassess or change solutions when facts change. It’s foolish not to change medicines when the infection has already morphed to something else," said Roxas, chair of the Senate committee on trade and commerce.

He said that in 2005 when the expanded value-added tax law was passed, the annual budget deficit was P250 billion while oil was at $30 a barrel in the world market. Today, the government claims to have zero deficit with oil at $100 per barrel.

"When government deficit was high, the people willingly helped out through EVAT. Now, our people are suffering from high oil prices so government must fulfill is duty to help by suspending the 12 percent VAT on oil," Roxas said.

Sen. Francis Escudero, chairman of the Senate ways and means committee, has scheduled a hearing on Roxas’ proposal before session resumes on January 28.

Escudero and Sen. Loren Legarda have called for the scrapping of the 12 percent VAT.

Roxas said world oil prices could possibly surge higher – well past $100 per barrel. He cited a projection made by Morgan Stanley, one of the world’s leading investment banks, that oil could hit $115 per barrel soon.

"The question now really is, whether the government should continue collecting the VAT on oil products. Or if the tax should be suspended to allow our people – consumers – to keep more money in their pockets at this time of abnormally high oil prices," Roxas said.

President Arroyo has called an energy summit to draw up strategies to address the economic hardships produced by record high oil prices. The summit will be held January 29 and 31, and February 5 and 7.

Roxas said he expects summit organizers to involve various sectors, including cause-oriented groups as well as labor and transport unions, in finding solutions to the economic problems associated with record high oil prices.

"The question now really is, whether the government should continue collecting the VAT on oil products. Or if the tax should be suspended to allow our people - consumers - to keep more money in their pockets at this time of abnormally high oil prices," Roxas said.

Sen. Joker Arroyo said the first step in addressing the skyrocketing oil prices is to examine the books of oil companies to determine if they are indeed losing money.

Arroyo said a close scrutiny of the revenue stream of oil companies would reveal if their continued jacking up of oil prices is justified.

He criticized colleagues who are pushing for the suspension of the VAT on oil but who voted to pass the measure while it was being scrutinized by Congress.

"Hindi naman basta-basta i-a-amend after helping to pass it. Di puwedeng atras-abante tayo rito," said Arroyo, who voted against the measure.

Arroyo said Petron Philippines, which is 40 percent controlled by national government, should lead the process of opening its books for public scrutiny.

He said government would be throwing away some P40 billion to P50 billion in tax revenues if the VAT on oil is suspended.

He said the income from VAT is already factored in the P1.227 trillion 2008 national budget.

In Roxas’ Senate Bill 1962, the VAT suspension will last for six months or until world oil prices have stabilized.

His proposal will effectively reduce fuel prices by about P4 per liter, and cost government P52 billion in foregone tax revenues annually. At this rate, the six-month suspension of the VAT on oil products would cost the government P26 billion, he said.

Roxas said the amount of potential tax revenues that will be waived by government is actually lower, at around P23 billion over a six-month period.

"This is because once the government puts the P26 billion in the pockets of consumers, the money will surely get spent on some form of taxable consumption," Roxas said. – JP Lopez and Dennis Gadil