Suspending fuel taxes 'inequitable and detrimental' to economic recovery: DOF

ABS-CBN News

Posted at Nov 15 2021 12:45 PM

A gasoline station employee attends to motorists as they gas up at a refueling station in Quezon City on July 20, 2020. Jonathan Cellona, ABS-CBN News/File
A gasoline station employee attends to motorists as they gas up at a refueling station in Quezon City on July 20, 2020. Jonathan Cellona, ABS-CBN News/File

MANILA - The proposed suspension of excise taxes on fuel to cushion the impact of rising gas prices is inequitable and detrimental to the country's economic recovery, the Department of Finance said Monday.

Suspending all fuel excise taxes and value-added tax (VAT) could lead to foregone revenues of P147.1 billion equivalent to 0.7 percent of the gross domestic product in 2022 (GDP), DOF Usec. and chief economist Gil Beltran said in a statement. 

Suspending only the fuel excise taxes and VAT under the Tax Reform for Acceleration and Inclusion (TRAIN) law, meanwhile, could lead to a P119.5 billion or around 0.5 percent of GDP in the same, year, DOF estimates showed.
 
Several consumers, transport groups as well as some lawmakers have called for the suspension of fuel excise tax after the prices of petroleum products rose for several consecutive weeks.

“The unrealized public spending and investments from the foregone revenues will be detrimental to our economic recovery and long-term growth. A more equitable way to address the impact of higher fuel prices is to provide targeted support to the vulnerable groups, particularly the transportation sector, which the government has already committed to do," Beltran said.

Beltran also added that higher-income households were poised to benefit 60 percent more from the suspension instead of lower income households.

Disposable income of the bottom 50 percent of households is estimated to increase by only 0.34 to 0.45 percent compared to 0.63 to 0.83 percent for the top 10 percent of households, the DOF said.

“With the suspension of fuel excise taxes, we will lose the improvements we made under TRAIN in making the tax system more equitable, in which those who are more financially capable pay more taxes,” Beltran said.
 
A more equitable solution is to provide targeted support for the vulnerable groups, he said.
 
The government earlier said it would release P1 billion to fund cash grants for some 178,000 public utility drivers.

Senator Grace Poe earlier in November filed a bill seeking to impose “automatic suspension” of the government’s excise tax collection on fuel.

Meanwhile, the House Committee on Ways and Means on Nov. 11 approved a bill that aims to reduce or suspend the fuel excise tax.

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