Lawmakers worried over DOF’s fuel tax plan

by Chino Leyco September 20, 2016

http://www.mb.com.ph/lawmakers-worried-over-dofs-fuel-tax-plan/

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Chua explained that it is the most prudent way to compensate for several years of government’s inaction over its outdated fuel tax rates.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.