DOF: No suspension of fuel excise tax

The country will lose PHP 138.8B if excise tax on fuel is suspended

The continued rise of fuel prices has prompted lawmakers as well as public transport groups to urge the government to suspend the excise tax levied on fuel. If the excise tax is suspended, PHP 10.00 and PHP 6.00 per liter will be cut from gasoline and diesel prices, respectively.

The finance department, however, gave a thumbs down to the idea saying that suspending the excise tax on fuel will do more harm than good.

Department of Finance (DOF) Undersecretary, Paola Alvarez, has briefed the media yesterday and said that suspending the excise tax on fuel will not be the best route for the country as it will hurt Filipinos in the lower-income brackets who are adversely affected by the rising fuel costs.

“If we suspend all the taxes, including VAT on all fuel products, we will lose PHP 138.8 billion in one year or 0.6% of our GDP. What we are proposing is to extend targeted support to the poor who needs it instead of totally suspending the excise tax,” said Alvarez in Filipino.

According to DOF estimates, 48.8% of the country’s retail fuel consumption comes from high-income households, while 30.8% of retail fuel consumption comes from lower-income households.

Alvarez added that, if the government will suspend the excise tax on fuel every time that the price of imported oil goes up, the government could have a budget deficit of up to PHP 1.5 trillion by 2032.

Instead, the finance department proposes a subsidy for the poor. “What we are proposing is to extend a targeted support to the poor who needs it instead of totally suspending the excise tax,” added Alvarez.

Through this scheme, fuel will be subsidized through the Pantawid Pasada program which will benefit drivers and operators of Public Utility Vehicles (PUVs).

What are your thoughts? Do you think there are other ways to help the population amidst the continuous rise in petroleum product prices?