Philippines: DOF estimates losses of PHP40bn in foregone revenues if fuel excise is suspended

  • THE DEPARTMENT of Finance (DoF) said that the government will lose some PHP40bn in revenue if it suspends the second tranche of the fuel tax hike in 2019, adding that it has yet to draft the implementing rules on how the tax will be suspended and reinstated.
  • According to the Tax Reform for Acceleration and Inclusion (TRAIN) law, the subsequent increases in fuel taxes will be halted if the Dubai crude benchmark hits or exceeds USD80 per barrel over three months, a level which it has already breached.
  • The law increased fuel excise taxes by PHP2.5 per liter in 2018, which is scheduled to rise by a further PHP2 and PHP1.5 per liter in 2019, and 2020, respectively, for a total excise of PHP6 per liter.
  • However, Undersecretary Karl Kendrick T.Chua said that the increase in fuel prices will also increase the value-added tax (VAT) payable, which could help offset the revenue loss. He added that the losses can also be minimized if the tax hike can be restored.
  • He said an inter-agency body is expected to produce in the coming weeks the implementing rules and regulations (IRR) for the possible suspension of the excise tax increase on fuel, especially the mechanism for reinstating it.
  • Senator Paolo Benigno A. Aquino IV on 3 Oct 18 queried the DoF on the absence of implementing guidelines for the possible suspension of the fuel excise tax. Mr. Chua has argued that a blanket suspension will benefit high-income families more, as they consume more fuel.
  • He said that the government will fast-track the release of its social mitigating measures such as the monthly PHP200 unconditional cash transfer for the poorest 50% of Filipino households in 2018, as well as PHP5,000 worth of fuel vouchers for public utility vehicle (PUV) franchise holders.
  • The cash transfers will rise to PHP300 in 2019 and will be rolled out until 2020, while PUVs will receive at most PHP20,000 in 2019.
  • According to Mr. Chua, fuel prices are too volatile to predict whether the USD80 threshold will be breached long enough to warrant a suspension.

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