Gov’t won't lose from oil excise tax freeze

October 23, 2018

Consumer group Laban Konsyumer Inc. (LKI) said government does not stand to lose should the second installment of the oil excise tax increase be put on hold.

In a statement, LKI President Victorio Mario Dimagiba said the government will still be able to get good revenues from petroleum products even without the excise tax hike, imposed through the Tax Reform for Acceleration and Inclusion (TRAIN) law.

“The country’s economic managers should not feel ‘disadvantaged’ by the suspension. Even without this, government collections from the VAT (value-added tax) on diesel and gasoline has already increased by 35 percent and 21 percent, respectively. This is equivalent to PHP1.26 per liter and PHP1 per liter, respectively. So, it’s not like the government is giving up a lot through the suspension,” Dimagiba said.

The Department of Finance (DOF) earlier claimed that higher oil prices can raise VAT collection by PHP14 billion. This can narrow the estimated foregone taxes from PHP41 billion to PHP27 billion, if the government will halt imposing excise tax on oil.

“Government should not focus on what they claim will be lost, but rather should focus on the benefit this will provide ordinary consumers as the heavy burden of high prices will be tempered and they will somehow be relieved of what they are paying for,” he added.

Dimagiba, a former trade official, added that while consumers “are asked to bear the record-high inflation today”, the government is benefitting from the higher world oil prices from tax collections on petroleum products.

LKI has joined the call of business groups such as Employers Confederation of the Philippines and the Philippine Chamber of Commerce and Industry to suspend the excise tax on oil to tame inflationary pressures.

The government is now open to suspend this provision in TRAIN law following the statement of President Rodrigo Duterte that he is considering this option.