THE proposal of some senators to suspend the excise tax on fuel to cushion the impact of Tax Reform for Acceleration and Inclusion (TRAIN) may accelerate inflation and hike the country’s debt, local economists said on Wednesday.
Action for Economic Reforms said the excise tax on fuel boosts government funds for infrastructure and social programs, such as the conditional-cash grants. Suspending it could jeopardize these initiatives and hurt the poor, according to the AER.
“The motivation behind suspending the fuel tax is supposedly to bring down inflation. Ironically, if you would suspend the oil tax, then that would result in, first, higher deficit. Higher deficit, given our present situation, will lead to higher inflation,” AER Coordinator Filomeno S. Sta. Ana III told reporters in a news briefing in Manila.
“Excise tax right now is the main generator of revenue for the government. In fact, despite the reduction of personal-income tax, which meant less revenue for the government, the government is still raking in new revenue because of the fuel tax,” Sta. Ana added.
Sens. Paolo Benigno A. Aquino IV, Joseph Victor G. Ejercito, and Grace Poe have earlier proposed to suspend the implementation of the fuel tax, as it contributes to price increases.
Sta. Ana said lawmakers and government officials who are pushing for its suspension must first review the full impact of the fuel excise tax on prices at the end of the year.
The Department of Finance (DOF) earlier said the non-indexation of fuel excise tax to inflation has eroded government revenues by P140 billion per year, based on 2016 prices.
“Think through the consequences—higher inflation, higher debt, less revenues, therefore it will affect the income-tax relief, cash-transfer programs, which are being sourced out from the TRAIN,” he said.
He noted that the increase in the country’s inflation rate was not caused by the TRAIN but by “external factors” like the increase in the international price of crude.
‘Pro-poor’ TRAIN
Sta. Ana noted that the government sources cash grants from taxes, and scrapping the TRAIN, or even the fuel excise tax, would hurt the poor more. “Those who are saying that TRAIN is anti-poor, are really the ones who are anti-poor, to be very blunt about that.”
Economist Calixto V. Chikiamco also said that TRAIN is not antipoor since revenues from the tax reform program are used for education, health, social services and infrastructure projects.
Chikiamco added that higher oil tax would only affect richer households, or Filipinos who own cars. “The resulting loss in government revenue and investments will hurt the poor more. Besides, the correct response is to liberalize rice importation to help the poor.”
Based on the analysis of the AER, the poorer Filipinos even gained from the TRAIN because, apart from receiving cash transfers under the Pantawid Pamilyang Pilipino Program, they also benefited from unconditional-cash transfers, even if they do not have jobs.
They estimated that the poorest 50 percent of households saw net welfare gains ranging from P1,512.44 in the fifth decile to as much as P1,953.25 in the first decile, or the poorest Filipinos, every year.
With reports from Cai U. Ordinario, Marc de la Paz and Pearl Anne M. Gumapos
Image credits: Nonie Reyes