By Samuel Medenilla & Bernadette D. Nicolas
THE government is now banking on low global oil prices to generate additional revenue for its novel coronavirus disease (Covid-19) measures by implementing additional taxes for imported crude and refined petroleum products.
Initial estimates put the possible bonanza from such for the government at P20 billion for six months, according to the Department of Finance.
On Saturday, President Duterte signed Executive Order (EO) 113 implementing the recommendation of the National Economic and Development Authority (Neda) for the temporary imposition of a 10-percent ad valorem tax on imported crude and refined petroleum products.
It will remain enforceable until Republic Act 11469 or the Bayanihan to Heal As One Act ceases to take effect or upon its reversion, whichever is earlier.
“The modified rates of import duty under Section 1 hereof shall immediately revert to zero as international oil prices increase, based on trigger prices indexed to oil prices in the world market, upon certification by the Department of Energy (DOE) that a trigger price has been reached, and the Department of Finance (DOF) has been notified of the same,” Duterte’s two-paged EO 113 said.
“The Bureau of Customs (BOC) shall then issue the corresponding Customs Memorandum Order to effect the said reversion,” it added.
P20-B revenue projection
Finance Undersecretary and Chief Economist Gil Beltran said in a text message to the BusinessMirror that the P20-billion revenue projection by the DOF was “based on low-end negative 1 percent growth and $35 per barrel price for Dubai crude.”
For this year, Beltran said the Cabinet-level Development Budget Coordination Committee (DBCC) is projecting a negative 1 percent to zero growth in 2020, as of April.
Prior to the Covid-19 pandemic, the DBCC is targeting a 6.5-percent to 7.5-percent GDP growth for this year.
Last month, prices of Brent Crude, the international benchmark for oil prices, plunged to a historic low of about $20 per barrel brought about by the lower oil demand because of the business and travel disruptions caused by the Covid-19 pandemic.
The additional 10-percent ad valorem tax will be on top of the existing Most Favored Nation (MFN) and preferential import duties of the said items.
It will apply to all petroleum oils and oils obtained from bituminous minerals other than crude; preparations not elsewhere specified or included, containing by weight 70 percent or more of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations; and waste oils; petroleum gases and other gaseous hydrocarbons.
The additional tax, once implemented, will apply to all covered products “which entered and [were] withdrawn from warehouses in the Philippines for consumption.”
EO 113 will take effect after being published in the Official Gazette or in a newspaper of general circulation.
Duterte said the Department of Budget and Management (DBM) will study and propose where the proceeds for the additional tax will be used for the government Covid-related response, including social amelioration program and other similar programs.
Image credits: Bernard Testa
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