Economic managers Monday said the poor would be shielded from steep increases in transport fares and prices of basic goods once Congress approves the hike in excise taxes on fuel as part of the proposed tax policy reform program.
In their joint statement, Finance Secretary Carlos G. Dominguez III, Budget Secretary Benjamin E. Diokno and Socioeconomic Planning Secretary Ernesto M. Pernia said the government would put in place targeted direct as well as indirect subsidies that would help the poorest half of the population when oil prices increase.
“To mitigate the impact of higher oil prices on low income and vulnerable households, we will use highly targeted transfer programs to ensure that the poorest 50 percent of the population is fully protected from the increase in oil excises, while the next 30 percent, which covers the commuting class, will be protected through indirect subsidies to public utility vehicles,” Dominguez, Diokno and Pernia were quoted by the Department of Finance as saying.
For economic managers, “increasing excise taxes on oil products is highly progressive as the top 2 million households, which comprise 10 percent of the total number of households in the country, consume almost 60 percent of oil products, while the top 200,000 households or 1 percent of the total, consume some 20 percent of oil products.”
“Only when tax reform and targeted transfers are pursued together can we ensure that the resulting policy reform will be truly inclusive and equitable,” economic managers said.
Earlier, Finance Undersecretary Karl Kendrick T. Chua disclosed the plan to grant up to P6,000 a year in direct subsidies to the poorest of the poor who would be impacted by the oil excise tax hike.
As for commuters and the working class, the DOF’s proposal was protection “by partially subsidizing their commuter fares by providing jeepney drivers, bus operators and tricycles with cash cards similar to the ‘Pantawid Pasada’ program, wherein they can use that card to offset the increase in excise so that the pass-through will be no more than P1—we are looking at P0.50,” Chua had said.
The middle class, meanwhile, would get to offset the higher fuel costs from the lower personal income tax they would enjoy, according to Chua.
From four main packages initially, the Duterte administration’s tax policy reform program will now have six packages, a bill for the first of which was already submitted to both houses of Congress last month.
The first of the six tax policy packages will adjust tax brackets to correct “income creeping”; reduce the maximum personal income tax rate to 25 percent over time, save for the “ultra-rich” who would be slapped a higher 35 percent; and shift to a simpler modified gross system.