Even as the finance department is opposing vehemently the suspension of excise tax on fuel products, the House is set to deliberate the bill calling for such suspension even if some P47-billion would be foregone from such a move. But Rep. Joey Salceda said intensified campaigns against fuel smuggling can cover for the foregone revenues as a result of the suspension.
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The finance department is adamant and vigorously against the stop in collection of excise taxes on petroleum products, saying the price cuts would benefit more the rich than the poor.
Proponents of fuel tax suspension at the House of Representatives however, were saying that whatever foregone revenues can be recovered by a more robust anti-smuggling program of the Bureau of Customs to effect more collections.
Disposable income
A statement from the finance department said the suspension of excise tax on fuel would likely improve the disposable income of wealthier households at a faster pace than others, making the tax relief inequitable.
The DoF estimates higher income households to benefit by around 60 percent more from the suspension of the taxes compared with lower income households.
P119.5-B losses
It would also result in a lost (excise tax) revenue of P119.5 billion or 0.5 percent of GDP (gross domestic product).
The disposable income of the top 10 percent of households would increase by around 0.63-0.82 percent on average next year if the excise tax on fuel products is suspended, but the disposable income of the bottom 50 percent of households would go up only by 0.35-0.45 percent.
Lost improvements
“With the suspension of fuel excise taxes, we will lose the improvements we made under TRAIN (Tax Reform for Acceleration and Inclusion) Law in making the tax system more equitable, in which those who are more financially capable pay more taxes,” Finance Undersecretary and Chief Economist Gil S. Beltran
Republic Act No. 10963 or TRAIN law raised the excise tax on fuel in three tranches from 2018-2020. The tax rates are currently at P10/L for gasoline, P6/L for diesel, P5/L for kerosene, and P3/L for LPG.
The House Committee on Ways and Means last week approved a bill that would temporarily suspend or lower the excise tax on some fuel products for six months
Albay Rep. Jose Ma. Clemente S. Salceda, chair of the committee, said he is confident the House of Representatives will approve the bill and send it to the Senate by the end of November.
Detrimental
DoF Finance Director Euvimil Nina R. Asuncion had said a six-month suspension and lowering of the excise tax on some fuel products as proposed could result in P37.5 billion in foregone revenue.
The DoF said the suspension of all fuel excise taxes and value-added tax could result in P147.1 billion in foregone revenues for 2022, or 0.7 percent of gross domestic product (GDP).
“The unrealized public spending and investments from the foregone revenues will be detrimental to our economic recovery and long-term growth,” Beltran said.
Targeted support
“A more equitable way to address the impact of higher fuel prices is to provide targeted support to the vulnerable groups, particularly the transportation sector, which the government has already committed to do.”
Salceda, chairman of the House ways and means committee, asked the BoC to intensify its anti-smuggling efforts to help the government reduce the foregone revenues from the 6-month suspension of fuel excise tax collections.
Fuel marking
During a briefing on the collection of oil taxes, fuel marking program enforcement activities and oil importation, Salceda cited the BOC for complying with the committee’s requests to intensify the fight against smuggling in petroleum products.
“I am thankful [to] the Bureau of Customs for complying with this committee’s request to strengthen the country’s anti-smuggling efforts on petroleum,” he said.
“I noted earlier this year that the gap between exports to the country and imports of the country is narrowing, a sign that smuggling efforts are getting more effective. I urge the BOC to go harder at smuggling as oil price increases,” Salceda addedd.
Plenary deliberations
Salceda said BOC’s strong anti-smuggling measures will help reduce foregone revenues from the proposed fuel excise tax suspension under House Bill 10488, now ready for plenary deliberations.
Under the bill excise taxes on low-octane gasoline, used primarily by tricycle drivers, will also be reduced to P4.35 from the current P7, while taxes on premium gasoline will be retained at P10.
BoC Deputy Commissioner Teddy Raval told lawmakers that the bureau has entered into a memorandum of agreement with the Department of Energy (DOE) and the Bureau of Internal Revenue (BIR) for data sharing. This MOA allows the three agencies more access to information, such as notifications submitted by oil companies, and the amount and quality of fuel intended to be imported.
MOAs
Also, the BOC official said the bureau also signed a MOA with the Philippine Coast Guard (PCG) on Joint Maritime Patrols using the active vessels of the PCG, procuring 20 Patrol Boats for exclusive BOC Maritime Patrol.
Salceda said, “most of the smuggling likely happens in private ports. So, it is crucial that we work with the PCG. I also laud strengthening the BOC Maritime Patrol.”
Meanwhile, Raval told lawmakers the BOC was able to mark 31.846 billion liters of fuel, which resulted in an increase in excise tax collection of P312.4 billion from September 2019 to November 5, 2021.
Increased collections
Currently, Raval said the BOC has 20- unit mobile laboratories to conduct field testing activities to 8,605 total retail stations nationwide.
In February and May, he reported that the BOC has seized 79,740.80 liters of diesel, 2,016 of kerosene and two units of tank trucks with an estimated value of P11.3 million.
On September 3, 2021, the BOC and BIR also seized 6,357 liters of unmarked diesel found in a Petromobil retail station in Arayat, Pampanga during its field- testing operation.
The markers serve as identifiers during field testing to determine the presence of illicit fuel in the market. The Fuel Marking Program aims to raise revenues while curbing fuel smuggling and leveling the Philippine oil industry’s playing field.
Marked fuel
Duties and taxes collected from marked fuel products totaled P315.64 billion as of Nov. 11, dating back to the launch of the program in 2019, DoF said.
The volume of fuel on which the taxes were collected was 32.07 billion liters starting from Sept. 4, 2019.
Revenue generated includes P285.83 billion in Customs duties from September 2019 to Nov. 11 this year, along with P29.81 billion in excise taxes between December 2019 and Oct. 28, 2021.
The program aims to deter fuel smuggling by injecting a special dye into fuel products to signify tax compliance. Absence of the dye is deemed evidence that the fuel was smuggled.
Around 73.36 percent of the marked fuel volume was in Luzon, with 21.15 percent in Mindanao and 5.49 percent in the Visayas.
Diesel accounted for 61.05 percent of the volume and gasoline represented 38.42 percent. The rest was from kerosene, according to Business World.
Tags: #DoF, #Housewaysandmeans, #suspendingexcisetax, #fuelproducts, #economy#RepSalceda