November 22nd, 2021
The House plenary began discussions on House Bill No. 10488, or the suspension of fuel excise taxes on diesel, LPG, kerosene, and low-octane gasoline, while reducing excise taxes on high-octane gasoline. This is after the Committee on Ways and Means, chaired by Rep. Joey Sarte Salceda (Albay, 2nd district), moved to approve the panel’s substitute bill reducing fuel excise taxes imposed under the Tax Reform for Acceleration and Inclusion (TRAIN) Law.
“I expect the measure to be approved on 2nd reading this week. We finished sponsorship today,” Salceda said.
For gasoline, the measure will reduce the tax for 91 research octane number or below to P4.35, from P10. Salceda explains that “This is the gasoline of choice for public utility vehicles (PUV).” For gasoline above that octane number, the bill aims to reduce the rates from P10 to P7.
For Kerosene, “decidedly the poor man’s cooking fuel,” the bill will reduce excise taxes from P5 to zero. For diesel, the bill will reduce the tax from P6 to zero. For liquefied petroleum gas, the rate is reduced from P3 per kilogram to zero.
“The Committee also saw fit to include a provision that mandates the Department of Energy and the Department of Finance to monitor price changes during this suspension, and to ask the Department of Justice to act on suspicious price adjustments. This will help ensure that the excise tax reduction is reflected in the retail price, and Filipino consumers and families actually benefit from the measure,” Salceda said.
“This is immediate relief. I am skeptical of targeted measures when the situation is dire because they tend to take time, and many fall through the cracks. A universal approach gets the job of easing suffering done quickly,” Salceda added, referring to counterproposals by the economic managers to resort to more targeted interventions.
“At the same time, I do not want to commit the next administration to a long-term policy of tax reduction. So, I think this is a happy compromise,” Salceda added.
According to the Department of Finance (DOF), Salceda’s proposal will result in foregone revenues of P37.5 billion. This, Salceda said, can be offset in part by increases in VAT collection due to higher prices.
The DOF also estimated that Salceda’s proposal could increase disposable incomes by 0.22 to 0.48 percent, increase consumption by around 0.2%, and reduce inflation by around 0.14%.
The bill also mandates the DOF and Department of Energy to monitor prices and exercise motu propio powers to investigate abnormal price activity, revert to TRAIN tax rates should crude oil prices reach below USD 60/barrel during the suspension period, provide the DBCC the power to reduce excise tax rates when certain thresholds are breached.
The bill also creates the Social Impact Stabilization Fund, which will be used and appropriated as ayuda for the lower 80% of households by income, when prices increase. This will be funded by imposing a P2/liter on petroleum products when the prices decline below the 30-year average of prices.
“The government tells me that we do not have the money for a large-scale ayuda for those who will be affected by higher petroleum prices. I think this feature solves that. In the future, when prices go up, we will have funds to support mass financial relief.”
DOF, DOE directed to improve price monitoring, anti-smuggling efforts
Salceda also directed the DOF to improve its anti-smuggling efforts.
“During periods of high prices, the incentive to smuggle also increases. That is why I would like the Bureau of Customs and the DOF to update me on its fuel enforcement measures. Earlier this year, we agreed that we will create a Task Force Paihi to combat fuel smuggling in our ports. I would like updates on that.”
“Perhaps foregone revenues could be recovered to cushion the revenue impact of this proposal.”
“I also ask the DOE to provide me a disaggregation of the components of pump price. That way, we can determine what other interventions will lower prices.”