Cheaper oil has prompted the government to reduce its customs collections as well as imports growth goals for 2015, even as the economy is seen to benefit as more money is spent by consumers on other goods.
As global oil prices remain on a downward trend, the Department of Finance (DOF) has also asked President Aquino to approve a comprehensive tax reform package that will likely expand the list of taxable products and services, Finance Undersecretary Jeremias N. Paul Jr. told reporters after the interagency, Cabinet-level Development Budget Coordination Committee (DBCC) meeting Tuesday night.
Paul said the DOF was still waiting for the President’s response and approval of the proposal, which would plug tax leaks expected in the medium term.
The Finance official said the tax package included both policy measures, which would entail legislation, as well as tax administration improvements, but declined to elaborate on specifics.
Paul earlier said one possible measure under the DOF’s tax reform package involved increasing the excise taxes on petroleum products, which have stayed low since the 1990s.
The National Economic and Development Authority (Neda) had said this was a good time to raise petroleum excise tax rates.
While the DOF moves to widen the tax base to offset leaks due to cheaper oil, the DBCC also slashed the collections target of the Bureau of Customs (BOC) for 2015 to P436.5 billion from P456.4 billion previously, as about P20 billion in foregone revenues were expected from lower oil costs.
Thus, the adjusted total tax revenues target covering the BOC and the Bureau of Internal Revenue (BIR) was brought down by the DBCC to P2.127 trillion or 15 percent of the gross domestic product or GDP from P2.177 trillion previously, which also reflected the BIR’s adjusted target of P1.673 trillion.
Taxes and duties from oil products contribute more than a fifth of the BOC’s annual collections. The country imports and consumes an average of 120 million barrels of oil a year.
The DBCC also cut to 1 percent its imports growth forecast for this year from 7 percent previously, “mainly due to oil price decline,” economic managers said.
But Socioeconomic Planning Secretary Arsenio M. Balisacan pointed out that the net effect of cheap oil to the economy would be “slightly positive,” especially for a net importing country like the Philippines.
Balisacan, who is also Neda’s Director-General, noted that less spending on oil products would increase consumption of other goods, whose net revenues could “more than offset” tax revenue losses.