NextGen Day

MANILA, Philippines — According to a Department of Finance (DOF) executive, the government prefers targeted subsidies to the suspension of excise taxes on gasoline items because the latter has a long-term detrimental impact on government revenues and the economy.

DOF Undersecretary Paola Alvarez said during the virtual Laging Handa briefing on Tuesday that higher-income households consume the most fuel, accounting for roughly 48.8%, while lower-income households consume around 13.8 percent.

As a result, while the suspension of the excise tax on fuel products will benefit higher-income households, it will be detrimental to the government due to lower tax collection, which will have an impact on the poor because the government will have less funding for its social services programs, she explained.

According to Alvarez, two bills in Congress seek for a temporary suspension of the fuel excise tax.

These include House Bill (HB) 10488, which would suspend excise taxes on oil goods from June to November 2022, and Senate Bill (SB) 2445, which would suspend the same taxes from June to December 2022.

According to Alvarez, the Lower House legislation is expected to cut government revenues by roughly PHP48.7 billion, while the Senate plan will result in tax losses of around PHP69.3 billion.

“Pag overall sinuspinde po natin lahat – iyong excise tax, including iyong VAT (value added tax) on excise tax ng lahat ng klase po ng gasoline – mawawalan po tayo ng PHP138.8 billion in one year or 0.6 percent of our GDP,” she said.

She further claimed that if the government makes the suspension of the oil excise tax automatic whenever oil prices rise, the government will lose PHP1.5 trillion by 2032.

“Ang pinu-propose po natin, imbes po natin ng overall suspension, magbigay po tayo ng targeted support doon sa mga mahihirap na nangangailangan.” (Instead of completely suspending the excise tax, we propose providing targeted assistance to the needy who require it),” she explained.

The payment will go to public utility vehicle drivers who are already enrolled in the Pantawid Pasada Program, according to Alvarez.

She claims that by implementing this approach, the government will be able to keep a tighter grip on its spending and avoid large income losses that will stymie its recovery from the pandemic.

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