THE government is losing about P145 billion, or 1 percent of the country’s gross domestic product (GDP), in potential annual revenues from fuel taxes, which can be plugged by adjusting excise taxes and indexing them to inflation, the Department of Finance (DoF) said.
In a statement on Wednesday, Finance Undersecretary Karl Kendrick Chua said the government wants the fuel tax adjustment included in congressional proposals to lower personal income tax (PIT) rates. Direct cash transfers will be given to “vulnerable sectors” to offset the impact of higher tax rates, he said.
Chua also said the Department of Finance (DoF) would vigorously pursue tax administration reforms at the Bureaus of Internal Revenue (BIR) and the Bureau of Customs (BoC) to help raise funds for the infrastructure build-up of 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 country’s tax system that require urgent correction, such as the non-indexation of tax rates to inflation,” Chua said.
He noted, for instance, that gasoline excise tax rates have not changed for the last 20 years while diesel has been tax exempt for the last 12 years.
These rates have led to a massive foregone revenue loss of about P145 billion in 2016 prices, which represents about 1 percent of GDP, the DoF official 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.
For vulnerable sectors and low-income groups, the DoF is proposing a targeted cash transfer program for the poorest 50 percent of households, which includes the reintroduction of the “Pantawid Pasada” program that will provide fuel price discounts to public utility vehicles, and a jeepney 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 said.