Gov’t to lose P2.5 B after court rescinded EO imposing resin tariff

Over P2.5 billion in potential government revenues would be lost as a result of a court decision that reversed an executive order on the imposition of tariffs on intermediate petrochemical products (resins), a study by the Board of Investments said.

In a letter submitted by Trade and Industry Undersecretary and BoI managing head Eelmer C. Hernandez to the Office of the Ssolicitor General Agnes VSsT Devanadera, the BoI has pointed out the negative impact on tax revenue generation, industry competitiveness and employment following the injunction issued by the Makati Regional Trial Court in August last year over the implementation of Eexecutive Order 486, which reduces the tariff rate to 5 percent from 10 percent on imported raw materials for the manufacture of plastic products resins of polyethylene (PEe), polypropylene (PP), polystyrene (PSs), and plyvinyl chloride (PVC), from ASEAN.

The suspension of EeO 486 has also created a tariff distortion because the tariff on finished plastic products has been brought down to 5 percent as against the 10 percent tariff on resins, the raw materials of the downstream plastic manufacturers for the production of plastic products.

The tariff distortion has only benefited the Association of Petrochemical Manufacturers of the Philippines or the midstream petrochemical players particularly, the polyethylene and polypropylene operation of JG Ssummit Petrochemical Corp., which produce the polymer resins used in the production of finished plastic products.

Based on the BoI study, the higher tariff on the imported raw materials would result in a 20 percent drop in production due to lower volume of importation resulting in import duty losses of around P399 million this year.

The estimated losses in duties are based on the 2007 industry figure wherein they reported increased production of 566,000 metric tons, 25 percent up versus 2006, as a result of increased importation due to the lower tariff rate of 5 percent at that time. The figure also assumed that 39 percent of the country’s total imports of resins come from ASEAN.

The Philippines imported import $796.27 million of petrochem products from ASEseANn and exported only $57.46 million, reflecting a negative trade balance of $738.81 million. Total imports from the world in the same six year period reached $2.09 billion while the country’s total export to the world was only $255.24 million.

The study also estimated P2.044 billion losses in value added tax from sales of locally-manufactured plastic products.

The industry estimated that every peso worth of raw material (resin) generates P2 worth of sales. The losses are based on the local industry estimated foregone P8.513 billion in potential sales of finished goods due to lower production. Multiply this by P2, this would amount to P17.03 billion and the 12 percent VAT would result in government foregone revenues of P2.044 billion.

In terms of competitiveness, the downstream plastics industry has shown its competitiveness against imports in 2007 when tariff of resins was brought down to 5 percent from 10 percent when the government implement EO 486.

[发布人:HT]    [发布时间:9/25/2009]    [点击次数:2857]    
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