Higher oil taxes seen to offset proposed income tax reform

MANILA, Philippines – Higher excise tax on petroleum products can offset the effects of tax reform and fund additional infrastructure developments targeted by the next administration, an oil industry executive said.

Fernando Martinez, founding chairman and president of the Independent Philippine Petroleum Companies Association (IPPCA), said there is great opportunity to increase taxes on petroleum products.

“There is an excellent opportunity for the next administration to impose a specific tax of around P3 to P5 in all petroleum products,” he said.

With higher taxes on petroleum products, overall petroleum taxes can reach close to P150 billion annually.

Martinez said this will be enough to sustain infrastructure development and modernizing the various roads and bridges the country badly needs.

The oil industry official also said the move to raise petro taxes would allow the next administration to implement tax reforms.

“The Duterte administration can then support the tax reform agenda which includes exempting from income tax those receiving P300,000 annually and putting a cap on corporate and individual income for those earning P2 million and above to 20 percent of taxable income equivalent to Singapore but higher by five percent to Hong Kong’s top income rate of 15 percent,” Martinez said.

The proposed P3 to P5 per liter tax on fuel products will not significantly impact pump prices and will not be enough to justify any hike in transport fare prices, Martinez said.

With this hike, IPPCA estimates diesel prices to remain within P30 per liter and gasoline below P45 per liter.

“In 2008, gasoline prices hit P60 per liter at around $100 per barrel, while diesel was at P50 per liter, which brought the fare prices to its current rate except for the voluntary rollback called for by the transport sector,” Martinez said.

The increase in petroleum taxes has been pushed by Martinez, who is also the chairman and CEO of Eastern Petroleum Corp., in the last two years, particularly when global petroleum prices plunged 40 percent.

In his previous informal talks with top Finance officials, Martinez said the government is estimated to generate a low P40 billion to a high P75 billion annually in specific taxes, given the country’s consumption stands at 100 million barrels a year.