MANILA, Philippines — The Department of Finance (DOF) has opposed a proposal to suspend excise taxes on fuel, arguing that the government stands to lose P131.4 billion in revenues that can be used to fund pandemic measures.
The DOF said the government would give up P24.7 billion in excise revenues and another P106.7 billion in incremental income, collected through the Tax Reform for Acceleration and Inclusion (TRAIN) Law, in 2022 if excise taxes on petroleum products are suspended.
“Any suspension of the imposition of excise taxes should be appropriately studied as the revenue to be forgone is substantial and may affect the government’s budget for COVID-19 recovery measures,” the DOF said.
The DOF also said the Department of Energy has no power to lift the excise taxes on fuel. The DOE can only do so if Congress passes a law providing the department the authority to tinker with the excise rates on oil products.
“The power of taxation is vested in Congress and absent any law, the DOE, the DOF or any other agency of the government has no power to suspend the imposition of excise taxes,” the DOF said.
Energy Secretary Alfonso Cusi said suspending the excise taxes on fuel can bring down pump prices by around P8 to P10 per liter, at a time when petroleum rates have gone up for the eighth consecutive week.
Fuel prices have now increased by at least P17.85 per liter for gasoline, P16.5 per liter for diesel and P14.19 per liter for kerosene.
In turn, economists expect inflation, or the general rise in commodity prices, to pressure buyers for the rest of the year caused by cost spikes in both food and fuel.
Inflation in September slowed to 4.8 percent from 4.9 percent in August – the highest since the 5.1 percent in December 2018. For this year, inflation has averaged 4.5 percent, exceeding the government’s target range of two to four percent.
On the other hand, the government can no longer afford to lose revenues as it is running tight in terms of funding for its pandemic response. For 2021, it expects to incur a budget deficit of P1.85 trillion, or 9.3 percent of gross domestic product (GDP).
To cover for the fiscal gap, the government is forced to borrow P3.07 trillion this year and P2.47 trillion in 2022.
In turn, the country’s outstanding debt is projected to balloon to a record P13.42 trillion, or 60.8 percent of GDP, next year, breaching the alarm level of 60 percent observed by the international community, including multilateral lenders.