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Philippines: Tax hike suspension to cost P41B
While the suspension of the increase in the excise tax on oil will immediately be felt by consumers in terms of lower prices of fuel, spending on some non-infrastructure projects, such as subsidies given to marginalized sectors, might have to be sacrificed.
Government will consider slashing non-infrastructure spending due to the P41-billion foregone revenue that would result from the suspension on the second tranche of the excise tax on fuel scheduled in January next year, according to Carlos Dominguez, Department of Finance secretary.
In the beginning of the year, government implemented the first tranche of the fuel excise tax. The second tranche, which the economic managers have recommended to suspend, calls for the imposition of additional P2 per liter tax on gasoline and diesel and P1 on kerosene.
Dominguez said the maximum foregone revenue from the suspension in 2019 is around P41 billion.
“(However, this does not take into account) increases in the price of oil, therefore the increase in value-added tax and the drop in the Philippine peso value will also increase our revenues,” Dominguez said.
“I don’t know exactly the calculation for the net (foregone revenues). We cannot calculate that because we don’t know what the future prices will be. But we don’t expect the full P41 billion to be the amount, plus we are going to take the necessary action not to increase our deficit,” he added.
Dominguez did not comment on what projects will be affected but said the matter will be tackled at the Development Budget Coordination Committee meeting scheduled today, October 16.
Written order
Newly appointed presidential spokesman and concurrent chief presidential legal counsel Salvador Panelo yesterday said a written order suspending the imposition of the second tranche of excise tax would be forthcoming to formalize the decision.
Panelo said the economic managers had recommended the suspension and that the President had “definitely” approved the move.
Under the law, the suspension of the implementation of the increase will take effect if the price of oil is $80 per barrel and above for a period of three months.
“For the first two weeks of October, it is already over $80 and in the forward market, the future market at the end of the year as of last week was over $80. So the market is telling us it’s going to be over $80, so we might as well announce the possible suspension so that people will not speculate anymore,” Dominguez said.
While there is still a need to determine under what circumstances the increase will be implemented again, Dominguez said he is assuming if for three months the price is lower than $80 per barrel, it can be reapplied.
Good for consumers
Alfonso Cusi, secretary of the Department of Energy, said the suspension will have an impact on the pump price of fuel but did not elaborate.
Consumer group Laban Konsyumer Inc. (LKI) said government should assure the suspension is properly implemented and cascaded in terms of lower prices of diesel, gasoline, kerosene, LPG, bunker fuel, aviation fuel and coal for the benefit of consumers.
“The suspension… will send signals to the stakeholders to rein in the inflation for the rest of the year. The regulators should continue doing their jobs attune to the suspension of the excise taxes,” said Vic Dimagiba, LKI president. (J. Montemayor and J. Macapagal)
Source: http://malaya.bayaninetwork.com/?q=business-news/business/tax-hike-suspension-cost-p41b