Philippine President Defends Oil Tax Policy

Related: Philippine President Delivers State of Nation Address

Philippine President Gloria Macapagal-Arroyo on Monday defended the administration's policy to maintain the 12 percent value-added tax in her eighth state of nation address.

Arroyo said the country is caught, along with the rest of the world, in the skyrocketing crude oil and food prices and a looming global economic slowdown.

She said the consumption tax was an important weapon since it "shores up fiscal independence," funds the infrastructure needs and the government can spend on a series of pro-poor programs.

Arroyo devoted a substantial part of her speech to defend the oil tax despite the fact that the policy has partly caused her approval rating to dip to a record low.

In the state of nation address, Arroyo said she would bear unpopularity by making tough choices "to save the day for our country."

"Because tough choices were made, the global crisis did not catch us helpless and unprepared," Arroyo said. "Through foresight, grit and political will, we built a shield around our country that has slowed down and somewhat softened the worst effects of the global crisis."

She said the short-term relief should not prevail over the long-term benefits as the oil tax is a policy that will benefit the next president and the next generation of the Philippines.

The Philippines introduced the 12-percent value-added tax on oil since 2005 and it had contributed significantly to the government's revenue. However, groups have called for the cancellation of the policy as the oil prices surged to record highs in the recent two months.

Militant and civil groups staged simultaneous rallies in parts of Metro Manila as Arroyo delivered her state of the nation address, many of whom urged the president to scrap the oil tax.