Senators on Thursday proposed strategies on how the government could help the public cope with the anticipated economic impact of the escalating conflict in the Middle East, including a proposed law to automatically suspend the value-added tax (VAT) and the excise tax on goods, services and fuel.
Senate Bill 1935, filed by Committee on Foreign Relations chairperson Erwin Tulfo on Thursday, seeks to amend Sections 106, 107 and 148 of the Tax Code. These provisions deal with the VAT on the sale of goods, importation of goods, manufactured oils and fuels, respectively.
The filing proceeded despite concerns that suspending the excise tax alone could cost the government about P300 billion in revenue loss if it lasts for a year, according to Senator Win Gatchalian, head of the Senate Committee on Finance.
The government tacks on a 12-percent VAT on the sale of domestic goods, services, and imported goods. Unlike the VAT, the excise tax is applied on specific goods and services, primarily alcohol, tobacco, petroleum and sweetened beverages, among other things. The excise tax on most of these products were increased under the Tax Reform for Acceleration and Inclusion, or TRAIN, Law.
If the Senate bill passes into law, the VAT on the sale and importation of fuel would be temporarily suspended when the average Dubai crude oil price exceeds $80 per barrel. The same would apply to the excise tax on oil when the average global oil price reaches or exceeds $80 per barrel.
Tulfo acknowledged Gatchalian’s concerns about a possible massive revenue shortfall but warned that the continued imposition of these taxes during the ongoing crisis in the Middle East could trigger higher costs of basic commodities and transportation, gravely affecting Filipino consumers.
Grant fuel subsidy now
“The transportation cost of food coming from the provinces, from various places, will all increase. Even imported goods from China will also increase because they will be shipped here on cargo ships while fuel costs are also increasing,” Tulfo said in a press briefing.
Senator Bam Aquino, meanwhile, called for the reactivation of the government’s fuel subsidy for transport sector workers as a cushion against a looming oil price shock.
Gatchalian said the President’s contingency fund could be tapped to provide immediate fuel subsidies to public utility vehicle drivers without waiting for the Dubai crude oil price to exceed $80 per barrel.
Under the Pantawid Pasada Program, beneficiaries receive a subsidy only when the average price of Dubai crude oil for the month reaches $80 per barrel.
Senate President Tito Sotto, for his part, urged the establishment of a national petroleum reserve to strengthen the country’s energy security and ensure supply stability amid conflicts in Middle Eastern countries that have affected key shipping routes, straits, and oil refineries.
He filed Senate Bill 1934, or the proposed Philippine Strategic Petroleum Reserve Act, which seeks to establish a state-managed strategic petroleum reserve capable of cushioning prolonged supply interruptions.
The measure mandates the maintenance of petroleum stocks equivalent to at least 90 days of the country’s average national consumption. It also seeks to establish reserve facilities nationwide that will store crude oil and refined petroleum products, including diesel, gasoline, jet fuel, liquefied petroleum gas, and other energy products deemed critical by the Department of Energy.