Oil tax freeze clash looms
The DoF chief said only the richest 10 percent of the population, who use up to 50 percent of all fuels, would benefit from the suspension
Daily TribuneThe DoF chief said only the richest 10 percent of the population, who use up to 50 percent of all fuels, would benefit from the suspension
Photo by King Rodriguez for the Daily Tribune
Senate Minority Leader Aquilino Pimentel III yesterday supported — while Finance Secretary Benjamin Diokno strongly opposed — a proposal to suspend the excise tax on imported oil products amid the skyrocketing fuel prices at the pump.
"Every week, our fellow Filipinos face the challenge of ever-increasing fuel prices. They need a lifeline now. I hope the government understands the gravity of the situation and the urgency of intervention to alleviate their hardship," Pimentel said.
"The suspension of the excise tax would offer a temporary respite and serve as an effective lifeboat for Filipinos struggling to cope with the sky-high fuel prices," he stressed.
House Deputy Majority Leader and ACT-CIS Partylist Representative Erwin Tulfo on Monday proposed a three-month suspension of the excise tax on imported oil and bio-ethanol to address the continuing surge in oil prices.
Tulfo's proposal to temporarily suspend the excise tax until December came after Speaker Martin Romualdez held a meeting with representatives of the oil industry players on the same day.
In a media briefing, Tulfo gave the impression that the House leadership would be inclined to recommend to President Ferdinand Marcos Jr. the suspension of the fuel excise tax.
For Pimentel, suspending the excise tax would "unburden" many Filipinos from the expected increase in the prices of basic commodities.
"The rising cost of crude oil will ultimately be borne by every Filipino because it leads to increased prices of goods, electricity, and more," he said.
Earlier, oil companies raised gasoline and kerosene prices by P2 per liter, with a more significant increase of P2.50 per liter for diesel.
Diesel and kerosene prices in the last 11 consecutive weeks rose by a cumulative P17.30 and P15.95 per liter, respectively, while gasoline prices in the last 10 weeks climbed by P11.85 per liter.
The global price of crude oil from the United States has risen to $92 per barrel, while European crude has increased to $95 per barrel since November last year.
'Only rich will benefit'
But Diokno quickly put a damper on Tulfo's proposal, saying that suspending the excise tax on petroleum products would benefit only the rich and severely damage the economy.
"We recognize the public sentiment to address the elevated fuel prices. However, as the government, it is our responsibility to be cautious in implementing policies that could negatively impact the macro-fiscal stability and sustainability of the country," he told reporters.
Suspending the excise tax would be "regressive," Diokno said, as it would delay infrastructure and social development projects for long-term economic growth under the Marcos administration, which aims to make the country a predominantly upper middle-income society by 2025.
He pointed out that only the top 10 percent of households with the highest incomes would benefit from a suspension as they consume nearly 50 percent of all fuels.
He noted that the lower half of households use up only 10 percent of all oil-based fuels. "When you formulate policy, you always think of what's the greatest good for the greatest number," Diokno said.
Likewise, suspending the excise tax on fuel would not help stave off inflation in the long run, he added.
"Any of the proposals will adversely affect our economic and fiscal recovery, our international credit rating, and our overall debt management strategy," he said.
He explained that the government would lose billions in revenue if it suspended the excise tax on fuel and its associated value-added tax.
For the fourth quarter of 2023 alone, Diokno said, the losses in government revenue from foregone VAT and fuel excise taxes would reach P31.2 billion and P72.6 billion, respectively.
Doom and gloom
"In total, for the whole year of 2024, the government will lose P280.5 billion," he said.
Diokno averred that the lost revenue would lead to a higher budget deficit — from 5.1 percent to 6.2 percent of gross domestic product — and a higher debt-to-GDP ratio in 2024 of 60.2 percent to 61.3 percent.
With a restricted revenue collection, Diokno added, the government will be forced to borrow more to support its projects and to repurpose some of its future revenues to debt payments.
"Higher borrowings will further increase our interest payments and budget deficit in the future," he said.
The solution, Diokno said, is to give targeted subsidies to those who will be most negatively affected by the higher fuel prices, such as jeepney drivers, farmers and fishermen.
He also said that eliminating the fuel tax would require time-consuming legislative action.
"Once the elevated oil prices subside, it may not be easy to restore the taxes on oil products. It is politically unpopular. That's the political economy of tax legislation. This has serious implications for fiscal sustainability," he warned.
