Imposition of excise tax on petroleum products needs further study–TMAP

File Photo from Petron

The Tax Management Association of the Philippines (TMAP) has asked the House of Representatives to conduct more studies on the proposal of the Department of Finance (DOF) to impose excise tax on petroleum products.

TMAP President Malou Lim, during the hearing of the House Committee on Ways and Means on Wednesday, said lawmakers should consider the economic impact of the tax increases on oil products, particularly on diesel and liquefied petroleum gas (LPG), before approving it.

“We recognize that other countries impose excise tax on diesel. However, what needs to be considered is the overall economic impact [to] the cost of  business and price of commodities.  Further study should be made for this purpose,” Lim told lawmakers.

Imposing excise tax on gasoline as compensating revenue measure, on the other hand, “may not adversely impact the poor and marginalized sectors of the society,” she added.

“We acknowledge the need to index excise tax on gasoline. The revised proposal already provides staggered increase, which will cushion impact to taxpayers, since fuel prices are expected to stay low for at least several years,” Lim said.

Earlier, House Committee on Ways and Means Chairman and PDP-Laban Rep. Dakila Carlo Cua of Quirino filed the revised tax-reform package submitted by the DOF.

The revised tax package seeks to restructure the tax rates and exempt individuals earning a gross annual income of P250,000 and below.

However, the bill also includes the imposition of excise tax on fuel as compensatory measure for the foregone revenues due to the lowering of income tax. The bill proposes a staggered increase of P6 per liter of diesel, kerosene and LPG within a three-year period.

The bill also includes the relaxation of the Bank Secrecy Act, imposition of excise taxes on automobiles and taxing Philippine Charity Sweepstakes numbers’ game and lotto winnings.

The tax-reform package would entail  foregone revenues of around P200 billion, but  will also generate around P206.8 billion for the government in the first full year of implementation.

Automatic increase 

Meanwhile, Lim also asked the lower chamber to reconsider a provision in the tax-reform package increasing by 4 percent every year, starting January 2020, the excise tax on petroleum products.

“The proposal under the bill is to increase by 4 percent every year. TMAP’s counterproposal is that increase should be based on inflation, and be done on a periodic basis rather than annually,” she added.

Under the tax package, tax rates for petroleum products shall be increased by 4 percent every year thereafter, effective January 1, 2020, through revenue regulations issued by the
secretary of finance.

Poor 

In a statement, Party-list Rep. Antonio Tinio of ACT Teachers said the proposed excise taxes on fuel products are new levies that will be shouldered by low-income earners and poor families.

Tinio said the leaded and unleaded premium gas will be slapped with an excise tax of P7 per liter (from P5.35 and P4.35, respectively) in July 2017, P9 in 2018, then P10  in 2019.  Products with zero excise, like kerosene, diesel, LPG and bunker-fuel oil, will be taxed with P3 in 2017, P5  in 2018, then P6 in 2019 per volume capacity.

“This proposal will actually impose taxes where currently there are none, in the case of kerosene, diesel, LPG and bunker fuel,” Tinio said.

“The DOF has yet to explain to the public: What is its justification for introducing new taxes, when the existing regime has seen it fit not to tax these products?” he said.

According to Tinio,  the new excise taxes will greatly hit the low-income earners and poor families.

“In rural areas, for instance, the common mode of transportation are motorcycles, or  habal-habal. They also need generators for electricity—these all use the products that the DOF now wants to tax,” he said.

“The DOF has yet to present hard data to substantiate its claim that the impact of new excise taxes will only be on the rich or high-income earners.  We should realize that while P9,000 to a high-income family is insignificant, P160 for the poor spells the difference between food on their plates and hunger for the family,” the lawmaker added.

He noted that the DOF earlier informed the House panel that its proposal will be borne more by the rich, with them paying P4,000 to P9,000 per year in excise taxes compared to poor families, who will pay only P160.

“The DOF also admitted that a significant share of expected revenue from the new excise taxes will come mostly from diesel, from 25 percent to 50 percent,” he said.

Tinio also argued that the proposal for lower personal income taxes should be “unbundled” from the tax-reform package, saying there are no opposition to the income-tax reform, unlike the other reforms it has proposed, such as the excise taxes and VAT.

“We want income taxes to be lowered without any precondition, and we don’t want income-tax relief for the people to be a hostage to more controversial proposals. The lowering of income tax  might not push through if other taxes will not be approved. We all know that the lowering is urgent and necessary. I, therefore, suggest that the committee should proceed with, and approve, lower  income taxes separately,” Tinio said.

The DOF, meanwhile, has assured the public that the government will provide subsidies to the affected sector.

Besides imposing new taxes on fuel products, the agency said the bill also provides that 40 percent of the first incremental revenues generated from the petroleum excise tax shall be allocated to fund highly targeted transfer programs and subsidies to public-utility vehicles for one year.

 

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