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Salceda recommends 6-month fuel excise tax reduction on diesel, kerosene, and gasoline; House tax chair wants price monitoring to ensure reduction is reflected in retail prices

November 2nd, 2021

House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) has recommended the reduction of fuel excise taxes on diesel, kerosene, and gasoline from December 1, 2021 to June 1 of next year in response to rising fuel costs which Salceda says “could be a serious dampener to economic recovery and price stabilization.” The House tax panel head filed the proposal under House Bill No. 10438.

“This Mean of Platts Singapore (MOPS) price, which is the basis for the suspension of excise taxes under the Tax Reform for Acceleration and Inclusion Law, has already breached the USD 84 per barrel for crude. The benchmark under TRAIN was USD 80 per barrel, such that when the price threshold is hit, we would have suspended 2020 fuel excise tax increases.”

“The 80 USD mark was an ‘alert level.’ We are past that level. MOPS for crude is now over USD 84. We should really take up a reduction in the excise taxes,” Salceda said.

The House tax chair is proposing exempting diesel and kerosene from excise taxes over the period, while gasoline excise taxes will be reduced from P10 per liter to just P7.

“Diesel is the poor man’s transport fuel. Tricycles, motorcycle delivery riders, farmers, and jeepney drivers use diesel for their vehicles. Kerosene is the poor man’s cooking fuel. I believe that the biggest reduction should be on these commodities.”

“Gasoline, on the other hand, is the vehicle of use for cars and SUVs. While we should reduce gasoline excise taxes, the distributional impacts will really be much better in diesel. It is much more progressive that way.”

Salceda says that his proposal is the ‘most fiscally sustainable’ among all current proposals.

“My proposal aims to provide relief without binding the state’s fiscal resources into an unsustainable commitment. The DOF’s full year estimate of a total suspension of fuel excise tax is upwards of P130 billion.”

“The expected revenue loss from the suspension would be P55.04 billion, of which P36.42 billion will be from diesel, P18.28 billion will be from gasoline, and P0.34 billion will come from kerosene. These losses will be partly offset by increases in VAT collections due to rising prices, which would be around P19.01 billion from these three products. The net decline in fuel tax collections will be around P36.03 billion.”

“I think my proposal involves a fiscal cost we can recover,” Salceda said.

Price monitoring efforts mulled

Salceda also wants the Department of Energy to be stricter with price monitoring.

“The oil deregulation law empowers them to investigate on the basis of abnormal price increases. Under this bill, I am proposing to give them motu propio power to investigate sellers for unusual price activity.”

“The ultimate goal is that the reduction goes towards the consumer.”

All options explored; excise tax the fastest relief

In an accompanying Aide Memoire to the House leadership, Salceda said that the excise tax reduction is the option that could provide the most immediate relief to the people.

“We have considered a discount to PUVs, a Pantawid Pasada, and all of them will have someone fall through the cracks, or will require so much implementation capacity. I don’t think we can implement it in time to really help our people.”

“The costs are also almost similar if we really try to reach all affected sectors.”

“This is the quickest way to do relief. I hoped I would not have to do this as tax chair, but the income and the employment situation is simply not in the best place to justify having our people absolve high prices.”

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