Press Releases

House tax panel approves oil excise tax reduction; Salceda sets up fund for low-income consumers, affected sectors

November 11th, 2021

The House Ways and Means Committee has approved today its substitute bill to various measures proposing to reduce or suspend the excise taxes on petroleum products. The substitute bill was primarily based on House Bill No. 10438, authored by the panel’s chairman, Albay 2nd district Representative Joey Sarte Salceda.

The panel’s approved bill will reduce excise taxes on diesel, kerosene, and liquified petroleum gas to zero. Excise taxes on low-octane gasoline, used primarily by tricycle drivers, will also be reduced, while taxes on premium gasoline will be retained. The excise tax suspension will be for six months.

“It’s immediate relief for Filipino families, especially affected sectors. The bill will cost the government around P45 billion, but what the government loses, the consumer gains,” Salceda said.

Salceda adds that there is a self-correcting mechanism in the bill.

“We embedded a mechanism for reverting it back to TRAIN rates if the prices normalize. If it goes back to 65 dollars per barrel of crude oil, then the excise tax rates will also normalize,” Salceda added.

“The premise of this tax relief bill is that the situation is not normal. If inflation weren’t so high, we would be discussing other matters. But now, consumers are hurting. Inflation is high. Incomes are depressed. So, immediate relief is obviously necessary.”

Salceda says the House hopes to turn the bill over to the Senate by the 3rd or 4th week of November, as “this is a priority measure of Speaker Velasco. I have explicit instructions from my Speaker to get this done.”

Social impact fund created

The measure also creates a special fund that will be devoted explicitly towards ayuda for affected sectors whenever oil prices go up.

Called the Social Impact Stabilization Fund, the mechanism will be funded by a charge of P2 per liter of diesel and gasoline when global prices reach lower than 45 USD per barrel of crude.

“The government manifested in our hearings that the problem with asking for a subsidy that is larger than their P1 billion fund for PUVs is the lack of sources. This one answers it for future oil price problems.”

“The 30-year average for crude is at around 48 USD per barrel. So, the prices will have to be abnormally low for the system to kick in. Basically, it addresses the cyclicality of prices. When they are too low, we can charge more so that we have funds in reserve for future ayuda. When the prices are high, we can release these funds to the public,” Salceda said.

“This is more direct than the oil price stabilization fund in the 1990s. That one benefited oil companies rather than consumers and the poor. This is an ayuda fund,” Salceda added.

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