The Department of Finance (DOF) said on Friday the proposed adjustments in oil excise tax rates would raise P807.4 billion in revenues for the government by the end of the Duterte administration.
In a statement, the DOF said adjusting fuel excise taxes and indexing these to inflation would raise P36.1 billion in the second half of 2017, P120.9 billion in 2018, P147.2 billion in 2019, P156.9 billion in 2020, P167.6 billion in 2021, and P178.7 billion in 2022.
Finance Undersecretary Karl Kendrick Chua said the estimates assume that both the House of Representatives and the Senate act soon enough on the first package of the DOF’s Comprehensive Tax Reform Program (CTRP), contained in House Bill (HB) 4774 that was filed last week by House ways and means committee head Rep. Dakila Carlo Cua.
The tax reform bill aims to stop subsidies on the fuel consumption of rich households. Money will be channelled to infrastructure that will generate more jobs, boost productivity and sustain high growth, Chua said.
“This is a highly progressive tax because we would be removing subsidies on the fuel consumption of the top 10 percent of households with monthly incomes of around P115,000 and above who consume almost 51 percent of fuel in the country,” Chua said.
Chua pointed out that the top 1 percent of households, which have monthly incomes of at least P293,000 each, account for 13 percent of the fuel consumption in the country.
Rather than indirectly subsidize the rich, additional revenues to be collected from the fuel excise increase would be better spent on targeted transfer programs for about 10 million poor and vulnerable households that will be affected by the tax hike, and earmarked for infrastructure projects to reduce traffic congestion and pollution and raise workers’ productivity.
“Lower-income households will see a minimal increase in excise tax payments compared with richer households. In particular, the lowest 10 percent of households will see a P160 increase in excise tax payments per year, while the richest 10 percent will see a P4,316 increase annually. This is an indicator of a highly progressive tax,” Chua said.
According to the DOF official, diesel, kerosene and liquefied petroleum gas have been exempt from the excise tax since 2005 and were taxed at a low rate of P1.63 per liter between 1997 and 2004, while gasoline has been taxed at only P4.35 per liter for the past two decades.
“The latest data from the Land Transportation Office show that 72 percent of newly registered sport utility vehicles (SUVs) were diesel-powered in 2013. The rich are taking advantage of this diesel exemption, and today, more than 90 percent of new SUVs sold are diesel-powered,” he said.
Chua said the adjustments under the bill would be staggered both for diesel and gasoline and other petroleum products over 2017 to 2019.
From 2020 onward, taxes will be raised by 4 percent to account for inflation, he added.
“Under the bill, there shall be no increase or indexation for the year if the average Dubai crude oil price in the month preceding the scheduled indexation exceeds 100 US dollars per barrel,” Chua said.
HB 4774 covers the lowering of personal income tax rates and a corresponding set of revenue-compensating measures, including lowering the rates for estate and donor’s taxes and expanding the value-added tax (VAT) base. It retains VAT exemptions enjoyed by senior citizens and persons with disabilities but adjusts automobile and fuel excise taxes.
Complementary reforms being considered by Congress include introducing a sugar-sweetened beverage tax, indexing the motor vehicle user’s charge to inflation, and granting an amnesty to past estate taxes due.
The revised plan also includes legislated administrative reforms in the Bureaus of Internal Revenue (BIR) and of Customs such as the adoption of a fuel marking and monitoring system to prevent smuggling and ensure that only high-quality petroleum products are sold in the market; the use of e-receipts; the mandatory link of the point-of-sale systems of establishments directly to the BIR; and the relaxation of bank secrecy laws for investigating and combating tax fraud.