DOF: Planned oil excise tax hike to finance poor; remove rich’s subsidy

While the Department of Finance’s (DOF) proposal to hike oil excise taxes would raise prices of basic goods, it is seen ultimately removing the “subsidy” long being enjoyed by the affluent who use fuel.

In a statement Friday, the DOF quoted Finance Undersecretary Karl Kendrick T. Chua as saying during the House ways and means committee hearing last Wednesday that higher fuel excise “is a highly progressive tax because we would be removing subsidies on the fuel consumption of the top 10 percent of households with monthly incomes of around P115,000 and above who consume almost 51 percent of fuel in the country.”

“The top 1 percent of households, with monthly income of around P293,000 each, account for around 13 percent of the fuel consumption in the country,” Chua added.

The revenues collected would instead be spent on targeted transfer programs for about 10 million poor and vulnerable households and for infrastructure, he added.

“Lower-income households will see a minimal increase in excise tax payments … in particular, the lowest 10 percent of households will see a P160 increase in excise tax payments per year, while the richest 10 percent will see a P4,316 increase annually. This is an indicator of a highly progressive tax,” the Finance official said.

Chua noted that diesel, kerosene as well as liquefied petroleum gas (LPG) have been excise tax-exempt since 2005.

“The latest data from the Land Transportation Office show that 72 percent of newly registered sport utility vehicles (SUVs) were diesel-powered in 2013. The rich are taking advantage of this diesel exemption, and today, more than 90 percent of new SUVs sold are diesel powered,” he added. —BEN O. DE VERA