Think tank backs road user’s tax hike to build, repair more roads

Higher motor vehicle user’s charge (MVUC), a proposal pending at the Senate, is needed to build and maintain more roads in the Philippines, according to the state-run think tank National Tax Research Center (NTRC).

Since the MVUC’s implementation in 2001, through Republic Act No. 8794, collections until 2017 by the Land Transportation Office (LTO) from motor vehicle owners nationwide totalled P159.1 billion, the NTRC said in a report.

In turn, a total of P136.8 billion was released between 2002 and 2017 for construction, rehabilitation, repair and upgrade of roads, road drainage as well as bridges, which were mandated by RA 8794 passed in the year 2000.

From 2013 to 2017, MVUC proceeds funded 3,157 projects worth P56.4 billion.

Awaiting passage by the two chambers of Congress was the Department of Finance’s (DOF) proposal to make the MVUC structure simpler while updating its rates to current prices.

Last March, the lower chamber passed House Bill (HB) No. 6136, which will raise MVUC rates by over 90 percent over a three-year period, beginning next year.

For NTRC, “road taxes remain the main source of revenue to provide sufficient and sustainable funding for the construction and maintenance of road networks, especially in countries which specifically earmark this fund source.”

“For the Philippines, MVUC remains an indispensable tool of the government in raising funds for road construction and maintenance,” the report said.

“Earmarking of funds can be viewed as one of the ways to guarantee a steady and reliable funding source, most especially for priority programs such as road infrastructure,” NTRC said.

But NTRC warned against earmarking for specific road projects as doing so reduces budget flexibility, as well as accountability and transparency, like what had happened to the Road Board, which was abolished last year following allegations of corruption and questionable use of MVUC funds.

“While earmarking can be one of the best ways to provide public service as it directly connects revenues to specific desired expenditures—in effect, financing road infrastructure, it could also be pointed out that the provision of earmarked fund for the purpose of road infrastructure makes the construction and maintenance of roads automatic,” the NTRC report said.

“That is, the need for infrastructure is dependent on the earmarked fund and not on the program needs relative to road infrastructure. This makes the system inefficient where earmarking could lead to financing of less important road infrastructure in one place over the more urgent need in other places,” NTRC explained.

Edited by TSB