Claims suspending fuel excise tax would largely benefit the rich
(Eagle News) – Finance Secretary Carlos Dominguez III said that the government expects to collect P147 billion in taxes this year from fuel, particularly P131.4 billion in excise taxes and P15.8 billion in VAT or value added tax.
The funds to be generated from these taxes would be used for the government’s ‘Build, Build, Build” projects, and for the salaries of government employees, including soldiers, teachers and policemen.
“So that money has already been allocated,” Dominguez told President Rodrigo Duterte during the latter’s Talk to the People this week.
The DOF chief said that suspending VAT would mean that these funds would be cut off too.
-Debt-to-GDP ratio to go up if fuel excise tax is suspended-
Suspending the excise tax on fuel would also mean the government would need to borrow more funds to compensate for this.
This would then lead the country to increase its debt to GDP ratio to “about 61.4 percent.”
“If we suspend this, and we don’t collect it, what will happen is our debt-to-GDP ratio will go up from an estimated 7.7 percent to 8.2 percent,” Dominguez explained.
“And it will mean that if we — if we will continue to spend the same amount of money, we will have to borrow more money and the amount of — and that will bring up our debt-to-GDP ratio by — to about 61.4 percent,” he said.
He said that if the excise tax on fuel is suspended as provided for in the TRAIN Law if the Dubai crude exceeds $80 per barrel, only the top 10 percent of income earners would benefit from this.
Dominguez claimed that cutting the excise tax would only benefit those “who have cars and the other richer people.”
“We have analyzed it and we know that the top 10 percent of income earners in the Philippines consume almost 50 percent of all the fuel. In other words, if we — and if we look at the top — bottom 50 percent of the Philippines, they only consume 13 percent of the fuel,” he said.
“So cutting the tax will benefit more the people who have cars and the other richer people,” the DOF chief said.
This situation would prove to be “inequitable,” he said.
-TRAIN law and tax increase on fuel-
Before the TRAIN law, the tax on gasoline was only P4.35 per liter. This was from 2005 to 2017.
There were no taxes imposed on diesel, kerosene and on liquefied petroleum gas (LPG).
In 2017, the executive recommended that Congress impose the following tax: P10 per liter on gasoline; P6 per liter for diesel; P5 per liter on kerosene; and P3 per kilo on LPG.
Congress agreed to this and the taxes were imposed.
“The reason we did this is because we needed funds for our Build, Build, Build Program and for our program, 10-Point Economic Program of the government,” Dominguez said.
“Remember that in 2017, in exchange for an increase in taxes, we also reduced the taxes to 99 percent of all the taxpayers. In fact, the result was each taxpayer, 99 percent of them got an average of one month’s salary for the year from the reduction of the tax,” he noted.
“We increased the tax on fuel because we needed it for Build, Build, Build, and we reduced the taxes on the individuals who are earning a salary and we exempted taxes of anybody earning less than P250,000 a year. So we have to keep that in mind,” he said.
Dominguez added that cutting the fuel excise tax would mean a reduction of only P10 per liter for gasoline.
The escalating tensions between Russia and Ukraine have caused a spike in oil prices.
The price hike on March 15 was the highest so far this year, and the 11th consecutive week of price increase.
Dominguez has recommended giving an additional P200 monthly subsidy for a year for the bottom 50 percent of Filipino households as a better alternative to cutting fuel excise taxes.
(Eagle News Service)