(File photo)
MANILA – The government prefers targeted subsidy over the suspension of excise tax on fuel products because the latter has long-term negative impact on government revenues and the economy, a Department of Finance (DOF) executive said.
During the virtual Laging Handa briefing on Tuesday, DOF Undersecretary Paola Alvarez said fuel consumption of those belonging to the higher bracket of society has the bigger share at around 48.8 percent while lower income households’ share is around 13.8 percent.
Thus, suspension of the excise tax of fuel products will benefit the higher income households but is detrimental to the government through lower tax collection, which, in turn, will impact the poor since the government will have lesser funding for its social services program, she said.
Alvarez said there are two measures in Congress that are calling for temporary suspension of excise tax on fuel.
These are the House Bill (HB) 10488, which calls for the suspension of the excise taxes on oil products from June to November 2022 and Senate Bill (SB) 2445, which calls for the suspension of the said taxes from June to December 2022.
Alvarez said the measure in the Lower House is seen to reduce government revenues by around PHP48.7 billion while the one in the Senate will translate to tax losses amounting to around PHP69.3 billion.
“Pag overall sinuspinde po natin lahat – iyong excise tax including iyong VAT (value added tax) on excise tax ng lahat ng klase po ng fuel – mawawalan po tayo ng PHP138.8 billion in one year or 0.6 percent of our GDP (gross domestic product) (If we suspend all the taxes including VAT on all fuel products we will lose PHP138.8 billion in one year or 0.6 percent of our GDP),” she said.
She also said if the government will make the oil excise tax suspension automatic every time oil prices shoot up, the government will lose around PHP1.5 trillion until 2032.
“Ang pinu-propose po natin, imbes po na suspendehin natin overall, magbigay po tayo ng targeted support doon sa mga mahihirap na nangangailangan. (What we are proposing is to extend a targeted support to the poor who needs it instead of totally suspending the excise tax),” she said.
Alvarez said the subsidy will be given to public utility vehicle drivers who are already enrolled under the Pantawid Pasada Program.
She said this program will allow the government to have control over its expenses and will not suffer from big revenues losses that will hamper its recovery from the pandemic. (PNA)
