by Chino Leyco September
20, 2016
Some lawmakers have
expressed concern over the Department of Finance’s (DOF) proposal seeking to
raise the levies of petroleum products to offset the losses from the lower
personal income taxes.
However, Finance
Undersecretary Karl Kendrick T. Chua was quick to downplay the fears, saying
higher fuel taxes would not severely affect the poor households as more than
half of the country’s oil supply is consumed by affluent families.
During the House of
Representatives’ ways and means hearing yesterday, Surigao del Sur Rep.
Prospero Pichay and Bayan Muna party-list Rep. Carlos Zarate expressed their
reservations over the DOF’s proposal.
Pichay explained using
the excise tax on fuel as the countermeasure to compensated the revenue losses
from lower income taxes would push the price of consumer goods, which will
ultimately put additional burden on the poor families.
Likewise, Zarate
further said that raising fuel taxes would hurt the poor the most.
But Chua said that the
finance department is also looking at providing “targeted” subsidies to poor
families to alleviate any subsequent effects of higher fuel prices on consumer
goods and services,
Data from the DOF
revealed that out of the 20 million households in the Philippines, two million
families are already consuming 60 percent of the country’s oil supply, while
about 200,000 top income families buy 20 percent of petroleum products.
Under the Duterte
administration’s tax reform plan, the government is proposing to hike tax on
petroleum products as their current rates have already been eroded by inflation
after nearly two-decades of zero adjustment.
Chua explained that it
is the most prudent way to compensate for several years of government’s
inaction over its outdated fuel tax rates.
Under the present
National Internal Revenue Code of 1997, the government imposes a fixed excise
rate for fuel products. Unleaded gasoline is taxed P4.35 per liter, while
leaded gasoline has a P5.35 per liter levy. Diesel, on the other hand, is zero
rated.
The DOF now plans to
adjust the excise tax rates on petroleum by indexing the present fuel pump
prices to average inflation since 1997.
“As you know we are
increasing the gasoline and related fuel from P4.35 to P10 per liter diesel and
the other essentials from P0 to 6 per liter. I think based on our calculations
we are looking somewhere around P160 billion [in fresh revenues during the
first year],” Chua told reporters.
“It will be gradual, so
the proposal will have a gradual implementation beginning 2017 and will mature
by 2019. We will phasing it with the rate increase so it doesn’t mean that once
it is implemented you will be hit by a P10 increase,” he added.
Based on DOF’s initial
estimates, the increase in fuel tax would raise transportation base fare by P1,
but Chua said this will be offset by the planned “targeted” subsidies to poor
families.
The finance official
explained the government is willing to provide support to the poorest of the
poor, so that they can cope with the planned increase in fuel taxes.
The finance department
is set to submit its final tax reform proposal before the end of this month.
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