WITH the global oil prices down and expected by experts to remain low in a few more years, the government is losing an estimated P145 billion in potential annual revenues because gasoline excise taxes have remained the same in the last two decades and diesel products have been tax-free for the past 12 years.
Finance Undersecretary Karl Kendrick Chua said the government is now proposing to correct these flaws in the country’s tax system by adjusting fuel excise taxes and later indexing them to inflation, along with the proposals to lower personal income tax (PIT) rates and provide direct cash transfers to vulnerable sectors to offset the impact of higher tax rates.
Chua said the Department of Finance is now pursuing tax administration reforms at the Bureaus of Internal Revenue (BIR) and of Customs (BoC) to help raise sufficient funds for the infrastructure buildup under the Duterte administration.
“But tax administration reforms are not enough to raise adequate funds to bankroll the Duterte administration’s agenda of high and inclusive growth, given the inherent flaws in the tax system that require urgent correction,” Chua said.
He noted, for instance, that the current gasoline excise tax rates have changed for the last 20 years while diesel has been tax exempt for the last 12 years.
“These rates, which have not been corrected to account for inflation, has led to a massive foregone revenue loss of about P145 billion (in 2016 prices), which represents over one percent of the Gross Domestic Product (GDP),” Chua said.
“Our proposal to adjust the fuel excise tax to around P6 per liter merely updates the rates to current levels as this represents the cumulative inflation since 1997.
“Even with the adjustments, the retail prices of gasoline and diesel will still be much lower than the rates during the oil price shocks of 2011 and 2012,” Chua said.
“Taxpayers will also get a relief from the impact of the fuel excise adjustments because of the lower PIT rates that the DoF is proposing under its CTRP (Comprehensive Tax Reform Program), which will more than offset the slightly higher transport, food and commuting costs,” he pointed out.
For vulnerable sectors and low-income groups, Chua said the DoF is proposing -- under the CTRP -- a targeted cash transfer program for the poorest 50 percent of households, which includes cash transfer, the reintroduction of the “Pantawid Pasada” program that will provide fuel price discounts to public utility vehicles, and a jeep modernization program to improve the engine efficiency of these vehicles.
“These proposed initiatives will cushion the impact of higher fuel excises on transportation, commuting, and food costs for the poorest 50 percent,” Chua added.