Higher tax burden feared for minimum wage earners

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Opposition lawmakers, who dubbed themselves the “Legitimate 8,” have expressed fears of additional tax burden to minimum wage earners over the Duterte administration’s plan to increase the excise tax on oil products.

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The group led by Albay Rep. Edcel Lagman raised the alarm a day after Finance Secretary Carlos Dominguez 3rd announced during budget deliberations that Malacañang was looking at raising excise tax on oil; reducing coverage of VAT exemptions by limiting them to food, medicine and education; rationalizing fiscal incentives; eliminating zero rated VAT; and imposing additional taxes on sugary products such as soft drink and other carbonated drinks.

These measures are being eyed to offset foregone revenues stemming from the government’s plan to reduce the individual and corporate income taxes from 32 and 30 percent, respectively, to 25 percent.

“The minimum wage earners are already exempted from paying the income tax. However, they will not be spared of the cascading burden of the additional excise tax on oil products. At the end of the day, these small wage earners won’t benefit from lowered income tax rates,” Lagman told reporters.

According to Dominguez, a higher excise tax on oil would mean that the P4.35 excise tax on fuel per liter—a rate dating back to 1997—will be pegged at P5.65 per liter.

“The increased excise tax on fuel would mean increase in prices of food and other basic commodities,” Akbayan Rep. Tom Villarin said.

The Finance department has estimated that the government will lose P173 billion once the income and corporate income taxes are reduced.

Of the P173 billion, P139 billion will be lost to lowered individual income tax while P34.8 billion in government revenues will be foregone because of decreased corporate income tax.

“We are concerned that the benefits that the taxpayers would get from income and corporate tax reductions will be eroded with the additional VAT burden, especially on petroleum products. Broadened tax base means more tax collection, and more tax collection is additional VAT burden for the majority of our people,” Lagman said.

Dominguez earlier argued that lower-income individuals would not be burdened by the additional VAT dues. He noted that two million of 20 million families in the country account for 60 percent of oil consumption while 200,000 of the top-income families in the country account for another 20 percent of oil consumption.

He said the government will grant targeted subsidies, like the Conditional Cash Transfer Program, to people who will need support.

“Instead of imposing the VAT on the poor people, there will be targeted subsidies for them to take care of any possible increase on VAT and oil prices,” Dominguez said.

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