WHILE the motor vehicle user’s charge (MVUC) remains as an indispensable tool of the government in raising funds for road construction and maintenance, a study published by the National Tax Research Center (NTRC) said the effective and efficient administration and disposition of the MVUC fund is essential in maintaining road networks and addressing traffic congestion, among others.
The NTRC study titled “Administration and disposition of the road tax among Asean and selected countries,” said earmarking of funds is one of the ways to guarantee a funding source for priority programs such as road infrastructure.
The MVUC, also known as road tax, is earmarked for road construction and maintenance, road safety projects and air pollution control.
However, the report said the earmarking of funds also has several caveats, such as reduction in the budget flexibility, and less transparency and accountability.
“While earmarking can be one of the best ways to provide public service as it directly connects revenues to specific desired expenditures, 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 report posted in the NTRC website said.
“That is, the need for infrastructure is dependent on the earmarked fund and not on the program needs relative to road infrastructure,” it added.
The study said 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.
The paper said at present, the government is already taking action to amend certain provisions of the MVUC law to make it simpler, transparent and more effective in providing revenues to finance road infrastructure.
