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Philippines Cuts Import Tariffs

by Mary Swire,, Hong Kong

28 May 2010

The outgoing government of the Philippines has approved the elimination of import tariffs on crude oil and refined petroleum products, while also warning that a new administration will need to impose new taxes if the country’s budget deficit is not to rise significantly next year.

According to the Finance Secretary, Margarito Teves, the cancellation of the existing 3% tariff on the import of crude oil, refined petroleum products and asphalt will reduce revenue by around PHP4bn (USD85.5m) per year. It is hoped that by this measure internal petrol and gas prices would be stabilized and inflationary tendencies in the economy controlled.

The zero tariff would mean that oil imported from all areas would now be subject to the same level of duty, given that imports from countries in the Association of Southeast Asian Nations (ASEAN) were already tariff free.

Other petrochemical products are also to be given reduced tariffs. It is planned that the import duty on mixed alkylbenzene and mixed alkylnaphthalene would be reduced from 3% to 1%, and on polyamide-6 chips from 8% to 1%. The former are used in detergents and plastics, while polyamide-6 chips are used in many sectors, including textiles, electronics and pharmaceuticals.

In addition, it was reported that the government is planning to allow hot and cold rolled coils, the raw material for galvanized iron sheets and presently subject to a 7% tariff, to be imported duty-free on a temporary basis while increased iron ore prices persist on world markets.

The government is also preparing further measures to reduce the import duties on basic commodities, such as sugar, coconut oil and rice, to comply with its obligations under other ASEAN agreements.

Meanwhile, Teves has also warned that, if the new administration to be installed following this month’s presidential elections does not agree to impose new taxes, the Philippines’ budget deficit could rise to 4.4% of gross domestic product in 2011, as against an expected 3.6% this year and a target of 3.3% next year.

President Gloria Arroyo’s government will leave office at the end of June. It is expected that the next government will be formed by Benigno Aquino III, who is reported to be leading in the results of the presidential vote held on May 10. He is against new taxes, having already rejected Teves’s previous suggestion of a value-added tax increase from 12% to 15%, and has concentrated instead on an improvement in tax compliance to increase revenue.

TAGS: tax | fiscal policy | budget | tariffs | Philippines | agreements | import duty | trade

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