THE Department of Finance (DOF) recommended Tuesday, March 15, a subsidy of P200 per month per household for one year instead of the government suspending the excise tax on fuel products amid the rising prices.
Several groups have called for the suspension of excise tax following the series of fuel price hikes brought about by the conflict between Russia and Ukraine.
The Department of Energy warned on Monday, March 14, that local pump prices per liter of diesel could hit as high as P81.10 and gasoline at P86.72 should the global prices continue to increase.
But Finance Secretary Carlos Dominguez III said during President Rodrigo Duterte’s Talk to the People Address held Tuesday night but aired Wednesday morning, March 16, that suspending the excise tax on fuel products will only benefit those who have cars or the rich people.
He said the Philippines cannot afford to suspend the excise tax on fuel products as of this time, calling it “very inequitable.”
“Cutting the tax will benefit more the people who have cars and they are the richer people. We will not be benefitting so much the bottom 50 percent of our population. That will make it very inequitable,” he told Duterte.
Dominguez instead proposed that the government provide “targeted relief to the most vulnerable sectors” through unconditional cash transfers worth P200 per month, or P2,400 per year to the bottom 50 percent of all Filipino households.
He said this would cost the government P33.1 billion, but this is a “little more than what we expect to be collecting from the additional VAT on fuel.”
He said the funds for this can be sourced from additional revenue from the value added tax (VAT) from fuel products, stressing the government is expected to collect an additional P26 billion of VAT on fuel given that the prices will be at $110 per barrel.
At $130 per barrel Dubai crude oil price, VAT revenues will increase by P37.5 billion, he added.
“Our recommendation is to use this extra money to subsidize the poorer sections of our society. We will have an additional P26 billion that we can distribute directly,” he said.
It is not yet clear though how the cash aid would be distributed to the country’s 12 million poor households, which Dominquez said will benefit directly from this alternative to excise tax suspension.
The Finance chief acknowledged that the P200 per month per household for one year might not be enough, but he pointed out that this is sustainable and this is what the government can afford to provide as of this time to make sure that the country’s finances will continue to be healthy.
“To make sure our finances, going forward and especially for the next administration, are still going to be healthy, this I believe is what we can afford,” Dominguez said.
“This is our firm recommendation: retain the fuel excise taxes imposed under Train Law and provide targeted subsidies to the lowest 50 percent of the households in the Philippines,” he said.
He assured that they have “analyzed the situation very carefully and we want to make sure that any recommendation we make is really good for the country especially for the people who are in need of assistance.”
Dominguez also reported that P3 billion from the P6.1-billion budget allotted for fuel subsidy and discount vouchers for farmers and transport drivers was released last week, and the first tranche was paid Wednesday, March 16.
He said another tranche of P2.5 billion for public utility drivers and P600 for farmers and fisherfolk will be released in April this month.
On Tuesday, March 15, oil companies in the country implemented another round of price hike: P13.15 per liter of diesel and P7.10 per liter of gasoline. This marked the 11th straight week of price hikes since the start of this year.