THE Philippine government stands to lose P138.8 billion in revenues in a year if it will heed calls by some groups to suspend both the excise tax and value-added tax (VAT) on fuel products amid soaring oil prices, the Department of Finance said.
Finance Assistant Secretary and spokesperson Paola Alvarez said the department is also neither in favor of lowering the excise taxes on fuel products nor the proposed automatic suspension of fuel excise taxes once the Dubai crude oil price reaches a certain threshold.
As of Monday, the Dubai crude oil price has hit $120.34 per barrel, according to the Department of Energy. Oil prices have been increasing amid Russia-Ukraine war.
“If we suspend all excise taxes overall, including VAT on all kinds of fuel, we lose P138.8 billion in one year or 0.6 percent of GDP,” Alvarez said, partly in Filipino, on Laging Handa Public Briefing.
She asserted that the two pending bills on the proposed suspension of excise taxes will result in a revenue loss for the government.
The finance official said they project a P69.3-billion revenue loss if the government implements an automatic suspension of excise taxes on fuel based on Senate Bill No. 2445.
Meanwhile, the government will suffer a P48.7 billion in revenue loss if a six-month fuel excise tax suspension under House Bill No. 10488 is implemented, Alvarez added.
In terms of implementing an automatic suspension of fuel excise tax, Alvarez said they estimate that P1.5 trillion in revenues will be lost until 2032, adding that this move outweighs the costs of giving a temporary fuel subsidy to those affected by the rising oil prices.
“If we make the suspension of excise taxes automatic, in the long run that will have a big impact on us because our economic growth and government spending are hinged on how much we collect in terms of revenue,” she said, partly in Filipino.
She also argued that higher-income households will be the ones to benefit from the automatic suspension of fuel excise tax since they consume 48.8 percent of the overall supply and pay more fuel excise taxes.
“So in times like this, if you make suspension automatic in the future, you’ll have nothing left to give as subsidy to the poor. So basically, it’s the wealthier people you’re giving a subsidy to, because they are the ones who get relief when you remove the excise tax,” she added.
Nonetheless, Alvarez said economic managers and President Duterte are coordinating on the next step the administration should take to further cushion the impact of soaring oil prices.
The Department of Budget and Management released last week a total of P3 billion in fuel subsidies and discounts to the transport and agriculture sectors.
Economic managers have earlier pitched to President Duterte the doubling of fuel subsidy for the transport sector to P5 billion from the original P2.5 billion; and the increase of fuel discounts for the agriculture sector to P1.1 billion from P500 million.
Image credits: Nonie Reyes