Budget and Management Secretary Benjamin Diokno said the government could earn P60 billion in additional revenue if it starts imposing excise tax on diesel products.
In a speech at the 6th general membership meeting of the Financial Executives Institute of the Philippines (Finex), Diokno said that raising excise tax on fuels, including diesel, is among the initiatives under the Duterte administration’s comprehensive tax reform plan.
Petroleum products are currently taxed at variable rates, ranging up to P4.50 a liter or kilogram, while no such tax is imposed on diesel at all under the present system.
“There should be [at least]P4 excise tax on diesel,” Diokno said, referring to the lower priced fuel product. He also called attention to the significant drop in the price of petroleum on the international market.
If passed, diesel tax alone will generate about P60 billion in annual revenue for the government, he said.
The budget secretary downplayed any negative impact of a higher fuel tax on the economy as a whole. “We are used to $100 per barrel” anyway, he said, referring to the global peak price of oil, to which current prices are not seen returning anytime in the near future.
One analyst sees a good chance for the government to implement the tax hike on fuels now that global oil prices have fallen significantly from their peak.
“I think it’s a good idea to tax fuels more, not only because prices are low now, but also because we [have been]collect[ing]very little tax on fuel, compared to other countries,” University of Asia and the Pacific economist Victor Abola said.
In addition, he said taxing petroleum products could also weigh on the sales of motor vehicles, which should ease the worsening of traffic conditions in the metropolis.
Abola added, however, “instead of a specific tax, it would be easier to apply the tariff, which does not need legislation.”
A possible drawback could only be its impact on inflation, another economist said.
“Inflationary impact could be significant if secondary effects come about including higher transport fares and higher prices of other consumer goods,” ING Bank Manila senior economist Joey Cuyegkeng warned.