Taking off the consumption tax on oil products in the Philippines, as Senator Mar Roxas has been pushing for, is a bad idea.
Higher-income households are the top consumers of all goods, especially oil products, so they'd benefit most from a tax reduction-- and that's just not right in a country with such a wide gap between the rich and the poor. Of course, some of the benefit would eventually trickle down to help the poor too, indirectly, but basically it would be a tax cut for the rich that hurts government revenue and sinks the country deeper into debt.
The well-off are the top consumers of oil products. That's why the United States (Population: 300 million) is the world's top consumer, eating up more than a quarter of the world's oil. That's more than the next five countries combined-- China, Japan, Russia, Germany, and India (Combined population: 2.8 billion).
If you look a list of countries ranked according to oil consumption per capita, the relation to wealth is so apparent that you could mistake it for a list based on GDP per capita. Look at the Philippines' positions, for example... Oil consumption per capita ranking: 127. GDP (PPP) per capita ranking: 128.
Oh, and the country at the bottom end of oil consumption per capita? The Democratic Republic of the Congo. Among the poorest of the poor.
What does need to be done is to channel these VAT revenues into spending on things we need like infrastructure and education. I'm not a fan of the idea of direct subsidies for the poor, but if that delivers the benefits to those that need it most then it is at least a step.
I'm not saying anything revolutionary here, this stuff is just common sense. The IMF agrees with me, at least.
Mar Roxas called suspending the VAT on oil a "win-win" solution for both the transport sector and for consumers, but a conflict between those two is obviously not the issue. It would be a big lose for government revenue, which the VAT was made to address, and making an exception that favors the rich more than anyone else does not make sense.
You know, Roxas really does seem like a nice, cool, smart guy. To see him positioning himself for a presidential run by championing an empty populist cause is unfortunate. He should know better. I think he does.