Higher taxes on oil products imminent

Finance Secretary Carlos G. Dominguez III INQUIRER FILE PHOTO

THE DUTERTE administration is bent on raising the excise tax on petroleum products and is now drafting a targeted subsidy scheme similar to the existing conditional cash transfer (CCT) program for poor households to be affected.

Finance Secretary Carlos G. Dominguez III pointed out that “contrary to the common perception that fuel excise tax increases would affect the poor the most, DOF studies show that 60 percent of petroleum products are consumed by the top 10 percent of the country’s top income earners.”

“In fact, the top 200,000 households [in terms of salaries and income] consumed 20 percent of the fuel products,” said Dominguez, who also heads the Cabinet’s economic cluster.

According to Dominguez, revenues generated from the fuel excise tax adjustments would be redirected to those who need financial aid the most through targeted subsidies such as cash transfers and increased spending on social protection programs.

“We are currently developing a targeted subsidy plan, similar to that of Indonesia, where the most vulnerable, especially [when it comes] to the increase in transportation costs, will be protected in a manner like that of the 4Ps,” the finance chief said, referring to the Pantawid Pamilyang Pilipino Program.

“As a general rule, the rich will have to pay more in taxes while the vulnerable sectors of society will be protected through highly targeted subsidies such as the conditional cash transfer program. We will ensure that the ordinary workers and the bottom 50 percent of households will be fully protected through social protection programs,” Dominguez earlier said.

The DOF quoted Economic Planning Secretary Ernesto M. Pernia as saying that now was the best time to adjust fuel excise taxes when crude oil prices in the market were low and the impact on inflation was almost negligible. Every P1-a-liter increase in fuel prices would translate to an inflation spike of just 0.1 percent, according to Pernia, who is also the director general of state planning agency National Economic and Development Authority.

DOF officials had said that the government stood to collect an additional P130.51 billion in 2017, P158.76 billion in 2018 and P249 billion in 2022.

The excise tax adjustment will entail, in the case of regular fuel, raising the levy from P4.35 a liter at present to P10 a liter next year, P10.40 a liter in 2018 and further to P12.17 a liter by 2022.

For diesel, from zero at present, an excise tax of P6 a liter would be slapped next year, P6.24 a liter in 2018, until it goes up to P7.30 a liter by 2022.