PRESIDENT Rodrigo Duterte approved Wednesday, March 16, the Department of Finance’s (DOF) recommendation to retain the excise tax on fuel products and provide P200 per month subsidy to 12 million poor Filipino families.
Acting presidential spokesperson Martin Andanar confirmed this in a Palace briefing Wednesday afternoon, saying the President has approved DOF Secretary Carlos Dominguez III’s recommendations considering that suspending the excise tax on fuel will reduce the government revenues.
“Inaprubahan ng Pangulo ang dalawang rekomendasyon ng DOF kaugnay sa pagtaas ng fuel price. Una, ang pag-retain ng fuel excise taxes na ini-impose ng Train (Tax Reform for Acceleration and Inclusion) Law dahil ang pagsuspende nito ay magre-reduce ng government revenue ng P105.9 billion na magpopondo sa mga programa ng pamahalaan. At pangalawa, ang pagbibigay ng targeted subsidies ng P200 bawat household to the bottom 50 percent of Filipino households,” Andanar said.
(The President has approved the DOF’s two recommendations regarding the increasing fuel prices. First is the retention of fuel excise taxes that are imposed through Train Law because suspending it will reduce government revenue, which funds government programs, by P105.9 billion. Second, the distribution of targeted subsidies of P200 per household under the bottom 50 percent of Filipino households.)
Dominguez said Tuesday night, March 15, during Duterte’s Talk to the People Address that retaining the excise tax on fuel products and providing instead P200 cash aid per month to every poor household for one year are a more equitable and sustainable response to the fuel crisis.
He said suspending the excise tax will only benefit the “richer people” or those who have cars.
“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.
He said providing “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 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.
He said if the price of Dubai crude oil will remain at $110 per barrel, the government will collect an additional P26 billion of VAT by December 2022. At $130 per barrel Dubai crude oil price, VAT revenues will increase by P37.5 billion.
“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.
Sought for comment, Mandaue Chamber of Commerce and Industry president Steven Yu said while Dominguez is correct in many aspects in preserving the country’s revenues and managing its balance sheets but with oil prices hitting unprecedented records, it is time to look at suspending the excise taxes for a few months to give reprieve to the consuming public.
“Every centavo saved from the consuming public’s fuel expenses is also added to their purchasing power on other basic needs so the money cycle/velocity stays in the ecosystem,” said Yu. “Such high fuel prices also create a psychological effect on people that tend to cause panic and anxiety, and we are in such a state of urgency that a reprieve needs to be dispensed soon.”
Yu added that the increasing value of goods will also increase the tax receipts of the government from manufacturers and importers so this may offset the reduced collections from excise taxes.
On Tuesday, March 15, oil companies in the country implemented another round of price hike, marking the 11th straight week of price increases since the start of 2022.
The global fuel crisis started in January, according to the Department of Energy, and it continued to affect countries in the world amid the ongoing conflict between Russia and Ukraine. (With KOC)