WITH its inclusion in Congress’s top agenda, the House Committee on Ways and Means on Monday created a technical working group (TWG) to craft a substitute bill reducing fuel excise taxes imposed under the Tax Reform for Acceleration and Inclusion (TRAIN) Law.
During the briefing of the committee, Albay Rep. Joey Sarte Salceda, the panel chairman, said the proposal will completely suspend excise taxes on diesel (from P6/liter) and kerosene (from P5/liter) from December 1, 2021 to June 1, 2022, while reducing excise taxes on gasoline by as much as P3/liter.
“I do not want to commit the next administration to a long-term policy of tax reduction. So, I think this is a happy compromise,” Salceda said.
In the same House hearing, meanwhile, Finance Director Euvimil Nina R. Asuncion said Salceda’s proposal under House Bill 10438 will result in foregone revenues of P37.5 billion.
However, Salceda said, such can be offset in part by increases in VAT collection due to higher prices.
Also, Asuncion estimated that Salceda’s proposal could increase disposable incomes by 0.22 to 0.48 percent, increase consumption by around 0.2 percent, and reduce inflation by around 0.14 percent.
But Asuncion said the provision under the TRAIN law cannot be invoked anymore as this has already lapsed and only covered excise tax increases from 2018 to 2020.
The DOF official also reiterated the agency’s objection to the proposed suspension or reduction of excise tax, saying it would be detrimental to the country’s economic recovery and long-term growth.
Earlier, economic managers announced the rollout of a P1-billion fuel subsidy for the transportation sector to cushion the impact of increasing oil prices. Government aims to subsidize around 178,000 public transport drivers.
However, lawmakers and transportation groups said the P1-billion fuel subsidy for public utility vehicles is not enough to addres the impact of soaring oil prices.
Meanwhile, Salceda directed the TWG to differentiate rates between premium and unleaded gasoline, given the use of unleaded gasoline by the public transport sector.
He also directed the TWG to mandate the DOF and Department of Energy to monitor prices and exercise motu propio powers to investigate abnormal price activity, revert to TRAIN tax rates should crude oil prices reach below USD 60/barrel during the suspension period, provide the DBCC the power to reduce excise tax rates when certain thresholds are breached.
Salceda also directed the TWG to create the Social Impact Stabilization Fund, which will be used and appropriated as ayuda for the lower 80% of households by income, when prices increase. This will be funded by imposing a P2/liter on petroleum products when the prices decline below the 30-year average of prices.
Members of the TWG include House Committee on Economic Affairs Chairperson Sharon Garin, Baguio Rep. Mark Go, and Marikina Rep. Stella Luz Quimbo.
Improve price monitoring
Salceda also asked the DOF to improve its anti-smuggling efforts.
“During periods of high prices, the incentive to smuggle also increases. That is why I would like the Bureau of Customs and the DOF to update me on its fuel enforcement measures. Earlier this year, we agreed that we will create a Task Force Paihi to combat fuel smuggling in our ports. I would like updates on that,” he said.
“Perhaps foregone revenues could be recovered to cushion the revenue impact of this proposal,” he added.
“I also ask the DOE to provide me a disaggregation of the components of pump price. That way, we can determine what other interventions will lower prices,” he added.
For his part, Deputy Speaker Rufus Rodriguez urged the lower chamber to pass the bill suspending excise tax increases on oil products this week.
“The Speaker wants the proposed tax reduction approved immediately or as soon as possible. So let’s do it before the week is over, on the first week of our resumption of session,” said Rodriguez one of the principal authors of the bill.
According to Salceda, his committee members will meet again on Thursday to discuss the fuel excise tax-related bills and formally discuss and approve the substitute bill.
“We could not approve today [Monday] because the bills have not yet been formally referred. But, the Committee on Rules lead by our Majority Leader, is committed to meeting about the bills and referring them to us before Thursday,” Salceda said.
Moreover, Rodriguez said cutting the oil levy “will bring immediate relief to our people, who are reeling from the double whammy of the raging pandemic and rising pump prices of gasoline, diesel, cooking gas, and other petroleum products.”
“Enacting the bill will cut the tax and pump prices by at least P3 per liter and P33 per 11-kilogram cylinder of liquefied petroleum gas. It will have a domino effect on the prices of consumer goods and services,” Rodriguez said.
“Alternatively, to hasten the approval process, we could just take cognizance of the broad clamor from the public for relief from soaring fuel prices and the opposition of the Department of Finance to our proposal. They will simply repeat what these sectors have been saying if we call them to a hearing,” he said.
In his bill, Rodriguez calls for an across-the-board suspension of excise tax adjustments under the TRAIN Law, and not just on certain oil products.