DOF opposes move to remove VAT from fuel

The Department of Finance (DOF) is opposing a bill at the Senate that aims to make fuel cheaper by removing the value added tax (VAT) on petroleum products.

Senator Aquilino “Kiko” Pimentel filed early this month Senate Bill No. 2163, which DOF noted would essentially be a “tax break” for those who have cars.

The proposed measure is meant to cushion the impact of the second hike in fuel excise tax that started January, according to Pimentel in a statement. The latest fuel excise tax increase was based on the Duterte administration’s Tax Reform for Acceleration and Inclusion (TRAIN) Act.

DOF Undersecretary Karl Chua, however, said Pimentel’s proposal would only benefit the rich.

“VAT is a tax on goods and services, so when you buy, you pay the VAT. If you remove that, the typical [ones] who buy, [or] the richer ones with cars, are going to get a tax break, which we are not very comfortable about,” Chua told reporters on the sidelines of the annual general membership meeting of the Nordic Chamber of Commerce of the Philippines.

“That’s why we propose from the start to continue the tax on fuel [in terms of] both excise and VAT, and then transfer some of the revenues for the poor consumers,” he also said.

According to Chua, revenues could be channeled through the conditional cash transfer program or the Pantawid Pasada Program.

“So [in] that way, it’s more fair (sic). Otherwise, when you remove the VAT, the primary beneficiaries are those who can afford because they have cars,” he said.

However, the Pantawid Pasada Program, which is essentially a fuel subsidy program for jeepney drivers, has been criticized for its slow implementation at a time when prices of basic goods and services are increasing fast. /kga