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Philippines: Fuel tax suspension to benefit rich – DOF
MANILA, Philippines — The Department of Finance (DOF) has doubled down on its opposition to proposals to suspend excise taxes on fuel, saying such a measure only benefits the rich whose disposable income will increase.
Finance Undersecretary and chief economist Gil Beltran yesterday said the government would lose the progress it has achieved in leveling the playing field for taxpayers if it approves legislation to lift the fuel excise tax under the Tax Reform for Acceleration and Inclusion (TRAIN) Law.
Beltran said suspending the TRAIN taxes on petroleum products would benefit the richest families, as it would prop up their disposable income compared to the poorest households.
Based on DOF computations, the tax relief will raise the disposable income of the richest 10 percent by 0.63 percent to 0.82 percent next year. On the other hand, the disposable income of the poorest 50 percent will only expand by 0.34 percent to 0.45 percent.
Beltran said removing the excise taxes would benefit buyers who never needed price cuts in the first place. He proposed that targeted measures, particularly the distribution of cash aid, be improved to assist vulnerable groups like public utility vehicle (PUV) drivers.
The economic team has approved the issuance of P1 billion to the Land Transportation Franchising and Regulatory Board (LTFRB) for the release of fuel subsidies to around 178,000 PUV drivers.
Once the cash grants are spent by the beneficiaries, Beltran said this would contribute P2.9 billion to the economy as a result of spending and other multiplier effects.
According to the DOF, the government stands to lose P37.5 billion in revenues while inflation will be cut by only 0.14 percentage point under a legislative proposal to suspend fuel excise for six months.
In October the DOF also computed that P131.4 billion in excise income and P15.8 billion in VAT collections, for a total of P147.1 billion—or 0.7 percent of the economy—will be lost in a full year suspension of the fuel taxes. The agency warned such an amount can finance efforts to recover from the pandemic.
On the fiscal side, the government plans to trim its budget deficit to 7.5 percent of the economy, or P1.67 trillion, in 2022, from the projected 9.3 percent, or P1.86 trillion, this year. To do this, it needs to grow its revenues by more than 14 percent to P3.29 trillion.
However, lawmakers from the House of Representatives want to temporary remove fuel excise to provide relief to consumers reeling from a net increase in oil prices this year.
Albay Rep. Joey Salceda has filed House Bill 10438 seeking to exempt diesel and gasoline from fuel excise and reduce the tax rate on gasoline from Dec. 1 to June 1, 2022.
Source: https://www.philstar.com/business/2021/11/16/2141508/fuel-tax-suspension-benefit-rich-dof