Oil tax collections at 3-year high but could be higher — DOF

MANILA, Philippines — Oil excise revenues hit their highest level in three years in September, but the Department of Finance (DOF) said losses were actually incurred and that this could be higher if tax rates will be reformed.

 

A total of P1.31 billion in oil excise taxes were collected that month, up a little more than a fifth from P1.09 billion in the same period a year ago, data from the Bureau of Internal Revenue (BIR) showed.

 

The figure was the highest monthly collection since the latter part of 2013.

 

While the trend showed collections are increasing, Finance Undersecretary Karl Kendrick Chua said the government is actually losing P145 billion every year from 12-year-old excise tax rates.

 

"Tax administration reforms are not enough to raise adequate funds to bankroll the Duterte administration’s agenda of high and inclusive growth," Chua said in a statement on Wednesday.

 

"(This is) given the inherent flaws in the country’s tax system that require urgent correction such as the non-indexation of tax rates to inflation," he added.

 

According to the National Internal Revenue Code, oil excise taxes are fixed charges on the manufacture or import of petroleum to the country, depending on the quantity per liter.

 

This means collections are not affected by either rising oil prices in the global market or the weaker peso now at P49 to a dollar level. The Philippines imports the bulk of its oil requirements.

 

"Demand (for oil) has become significant in recent years due to the sheer size of the growth of the motorists," said Emilio Neri Jr., lead economist at Bank of the Philippine Islands.

 

The Duterte administration is proposing to hike gasoline excise taxes from P4.50 per liter to P6 and impose the same on the currently exempted diesel products.

 

This has met strong opposition from Congress which said it will hit the poor, particularly public utility vehicles. Chua, however, reiterated that "vulnerable groups" will be supported by countermeasures.

 

These include the revival of Pantawid Pasada program for fuel credits and discounts as well as cash transfer to the poorest 50 percent of households.

 

Oil excise hike and support mechanisms are part of the first package of the comprehensive tax reform program stuck unnumbered in Congress.

 

"With higher revenues from the oil excise tax reform, we can fund the massive public infrastructure program that is needed to reduce traffic congestion, improve connectivity and raise the economic productivity of Filipinos...," Chua said.

 

Neri, however, said this may not be necessarily the case.

 

"Oil excise taxes are inelastic, which means this will not necessarily result into lower car purchases," he said in a phone interview. 

 

The DOF is also preparing higher excise levies for automobiles on one of its tax reform packages.

 

"Definitely, raising oil excise taxes is a key element, a significant contributor to the tax reform. But I don't think it will make or break the chances of other tax amendments," Neri said.