Excise tax on petroleum should stay, DOF says

(File photo)
(File photo)

THE Department of Finance (DOF) has maintained that excise tax on petroleum products should stay amid mounting calls to suspend it.

The DOF has cautioned the next administration against suspending excise taxes on petroleum as it is not the most efficient approach to alleviating the conditions of affected sectors.

“The better and more equitable way to address the impact of the increasing fuel prices is to provide swift and targeted support to the vulnerable sectors,” Finance Secretary Carlos Dominguez III said in a statement.

As pointed out by the DOF, a suspension will reduce government revenues by P105.9 billion or 0.5 percent of gross domestic product (GDP) in 2022, resulting to a higher deficit and debt for the government.

An increase in deficit and debt, in turn, will potentially raise interest rates on government debt, thereby reducing much-needed fiscal space for funding crucial social and economic programs, more so now when the government needs to sustain and even boost the domestic economy’s recovery from the lingering pandemic and Russia-Ukraine conflict, it said.

“The suspension of the imposition of excise taxes on petroleum is also extremely regressive and primarily benefits higher-income households,” Dominguez explained.

“We will just be subsidizing the top 10 percent of Filipino households who consume about 50 percent of total fuel consumption in 2022. This means that the larger financial benefits of the suspension will not go to the poor, but to higher income households,” he said.


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