Proposal to remove VAT from petrol condemned by World Bank

by Richard Kilner

Story link: Proposal to remove VAT from petrol condemned by World Bank

The Philippine government has been advised by the World bank not to relent under pressure to remove VAT from petroleum products.

The World Bank and the International Monetary Fund both call on the government to retain VAT on petrol, as removing it could compromise the government’s revenue generation.

In addition, the IMF has described the potential removal of VAT as anti-poor.

In recent years the Phillipine government has worked hard to decrease its deficit whilst increasing its revenue, according to the World Bank, which went on to say that removal of VAT from petroleum products would be a backwards step.

The high oil price will increase revenue for the government, in the short term at least, and allow it to plough the money back into public investment.

Any step taken that does hinders fiscal consolidation in the Phillipines would see the cost of borrowing to the government rise.