DOF: P6 hike on diesel excise tax to have minimal impact

THE Department of Finance (DOF) assured Friday the public transport operators and drivers that the government proposal to adjust the diesel excise tax to P6 per liter will have "minimal and manageable" impact on the majority of Filipinos.

DOF Undersecretary Karl Kendrick Chua said the adjustment would instead be felt more by rich families that actually account for around 50 percent of the country’s fuel consumption.

He said to reduce the effect of this proposed tax rate adjustment on vulnerable sectors, the government plans to implement various initiatives, including targeted cash transfers to offset the would-be slight increase in transport and food prices on the poorest 50 percent of households.

The government will also help the transport sector and commuters by reintroducing the Pantawid Pasada Program, and help public utility jeepneys (PUJs) modernize their engines to be more fuel efficient, he said.

For instance, jeepney drivers plying the España Boulevard (Manila) to Project 2-3 (Quezon City) route spend some P700 a day in fuel and earn around P2,000. With the higher diesel excise tax, they will spend an additional P150, Chua noted.

“However, this will have minimal effect on their income and on fares once the targeted transfer, the Pantawid Pasada, and the jeep modernization program are implemented,” he said.

“For example, the jeep modernization program can potentially reduce fuel consumption by P350 pesos (or a 50 percent improvement) while the Pantawid Pasada can keep any fare increase to a minimum. With higher take-home pay due to lower income taxes under the tax reform program and the cash transfer to the poor and vulnerable, the effects of the slight increase in fares can be lessened further,” Chua said.

He also clarified the misconceptions that higher fuel taxes would drive up food prices.

He pointed out that from January to December 2016, diesel prices increased by P10 per liter, representing a 50 percent increase from around P20 to P30.

“However, food inflation increased by only 3.6 percent and overall consumer prices by just 2.6 percent. This is because the economy is well managed and people are benefiting from growth in the form of higher income and wages. With stronger government effort to improve agriculture productivity and build more infrastructure, inflation can even be managed better,” Chua said.

He said he and other DOF executives had wanted to explain these points to a handful of people protesting the proposed fuel tax hike, but the DOF-planned dialogue never took place as the protesters immediately left on Friday morning--without meeting with them--after staging their brief rally in front of the DOF compound in Manila.

He pointed out that even when diesel prices doubled from around P20 to P40 per liter between 2010 and 2012, the base fare for jeepneys increased only from P7 to P8.50.

The minimal increase, Chua said, is because fuel accounts for only 30 percent of PUJ revenues and the government came up with the Pantawid Pasada program precisely to minimize the impact of high diesel prices on public transport costs.

Given that the top 10 percent of households (comprising the richest 2 million households) account for almost 50 percent of all petroleum consumption, while the top 1 percent (comprising the richest 200,000 households) account for 13 percent of all petroleum consumption, Chua said that raising oil excises means that "we stop subsidizing the consumption of the rich and instead use the additional tax revenues to fund infrastructure and protect the poor.”

“Our proposal to adjust the fuel excise tax to around P6 per liter merely updates the rates to current levels as this represents the cumulative inflation since 1997. Even with the adjustments, the retail prices of gasoline and diesel will still be much lower than the rates during the oil price shocks of 2011 and 2012,” Chua said.

The DOF has proposed to the Congress the adjustment of fuel excise taxes as one of the revenue-offsetting measures under the Comprehensive Tax Reform Program (CTRP).

The tax reform plan is meant to help the Duterte administration raise enough funds to finance its ambitious program to fill the infrastructure backlog left behind by previous governments, and which has hurt the country’s regional competitiveness as an investment haven, and has made majority of Filipinos less productive. (SDR/SunStar Philippines)

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