MANILA, Philippines — The Philippine Chamber of Commerce and Industry (PCCI), the country’s largest business group, is supporting calls for the suspension of the increase in fuel excise tax set for next year under the Tax Reform for Acceleration and Inclusion (TRAIN) law.
“We are for that because the increase is so high,” said PCCI president Alegria Sibal-Limjoco.
Under the law, which took effect last January, excise tax on gasoline increased to P7 per liter from P4.35 per, while new tax rates of P2.50 per liter would be levied on diesel, P3 on kerosene and P1 per kilogram on liquefied petroleum gas (LPG).
For next year, fuel excise tax on gasoline will increase to P9 per liter, diesel to P4.50 per liter, kerosene to P4 per liter and LPG to P2 per kilogram.
Limjoco said finance undersecretary Karl Chua has voiced the department’s preference for subsidies to those in need over suspension of the increase in tax rate.
The Department of Energy is also pushing for an amendment to the TRAIN law to allow the suspension of the second round of fuel excise tax increase.
“That is what he said. Of course we will still discuss it during the PBC (Philippine Business Conference) and we will see,” Lomjoco said.
The PCCI is holding the PBC on Oct.18 to 19, during which it expects to come up with a resolution identifying barriers to business, as well as proposed solutions.
Earlier, the Employers Confederation of the Philippines said it wanted government to hold off the scheduled increase in excise tax and take immediate action to curb inflation.
Inflation rate reached a nine-year high of 6.4 percent in August, up from 5.7 percent in July.
For the House minority, the government can afford to forego the new and increased fuel taxes imposed under TRAIN.
Minority Leader Danilo Suarez said revenues from such taxes are just a drop in the bucket compared to the huge amount of funds state agencies fail to spend due to inefficiency and procurement issues.
“The government has P1.3 trillion in unused appropriations. We passed new taxes knowing that agencies are not fully utilizing their budget. Why do we need to raise more money and burden our taxpayers? It is difficult to make sense of this,” he said.
He urged the DOF to strictly enforce the Lateral Attrition law of 2005, which mandates the replacement of collectors of the Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC) who do not meet their revenue targets.
Suarez said even BIR and BOC commissioners could be dismissed for their agencies’ failure to achieve the collection goals set for them by the DOF.
“I have said it before, and I will say it again, strictly implement this law and let it strengthen the administration’s drive in promoting transparency and accountability,” he added.
Deputy minority leader and Buhay Rep. Lito Atienza said taxes under TRAIN “have caused untold sufferings among our people, especially the poor.”
“It is clear that these levies are largely to blame for the record inflation. Even the administration’s economic managers, who were in denial mode, have belatedly admitted this,” he said.
No need for new taxes
He said the government does not have to impose new taxes. “Less corruption and efficient collection of levies and enforcement of tax laws are the key to generating more revenues,” he stressed.
According to the Philippine Statistics Authority, inflation in August hit 6.4 percent, the highest level in nearly 10 years.
The Bangko Sentral ng Pilipinas is projecting that inflation jumped in September to between 6.8 percent and seven percent.
The administration’s economic managers led by Finance Secretary Carlos Dominguez III have been claiming that taxes under TRAIN contribute less than one percent to inflation.
But leftist lawmakers, who have filed a bill to scrap provisions in the law that imposed new and higher levies, are disputing such claim.
Insofar as fuel inflation is concerned, they said TRAIN accounts for at least 30 percent.
They cited the case of diesel, which was levied an excise tax of P2.50 per liter, plus 12 percent value added tax applicable on such tax.
They said that of the P9-P10 increase in the pump price of diesel since January this year when the TRAIN law was implemented, excise tax and VAT amount to P3.
“That is a third or 33 percent and definitely not less than one percent of the total adjustment,” they stressed in a statement.
Calls for suspending fuel levies under TRAIN have mounted due to increase in the cost of crude oil in the world market to more than $80 per barrel.
Suspending or repealing TRAIN, however, is out of the question for Speaker Gloria Macapagal-Arroyo.
“The TRAIN, you know, during my time, we passed the E-VAT. The good effect of taxes on the economy is in the long term. Without those, there would be no infrastructure. So those are really needed,” she told reporters in Filipino.
She said the administration’s economic managers are addressing the problem of high inflation.
“My only request to them – actually they have the right policies more or less – is faster implementation, especially on day-to-day problems like high prices of consumer goods,” she said.
‘Do it faster’
Arroyo, who is an economist, said the economic managers are doing what they could to control inflation. “Perhaps they should act faster,” she said.
There are at least four measures in the House calling for the suspension, amendment or repeal of TRAIN.
The authors are Robert Ace Barbers of Surigao del Norte, Romero Quimbo of Marikina, the Makabayan bloc of leftist party-list representatives and the opposition group of Edcel Lagman of Albay. They are blaming the law for high inflation.
In an interview on Wednesday, DOF’s Chua said the government could possibly lose as much as P40 billion in gross revenues if the next increase in oil excise taxes gets suspended for an entire year.
But Chua said the loss might be offset by the increase in the government’s value-added tax (VAT) collections, which will come with higher oil prices.
“For sure, the excise is minus P40 billion. But because the prices of oil are higher, the VAT, which is based on the price, will also be higher. I just cannot say now if it will be enough to offset; it might offset part of it,” Chua told reporters.
Under the TRAIN law, the next increase in fuel excise tax gets automatically suspended if Dubai crude oil prices average at least $80 per barrel, based on the Means of Platts Singapore, in three months preceding the scheduled increase.
Chua clarified that the suspension may not take effect the whole year and may be reversed once global oil prices normalize. This means foregone revenues could be lowered further.
The DOF, BIR, BOC and Department of Energy are drafting the implementing rules and regulations setting the condition for reinstating fuel excise tax.
“What is a suspension? It’s like class suspension, it’s not forever. When things go better, it resumes. So we have to determine in the IRR when it will resume,” the DOF official said.
“We’ll make it clear in the IRR, which will be approved, I suppose in the coming weeks,” he added.
Meanwhile, Budget Secretary Benjamin Diokno said they are prepared to suspend the next increase if Dubai crude averages at least $80 per barrel in the last quarter of the year. “It’s in the law. We’ll follow the law,” he said.
But he warned of possibility of the suspension of the Pantawid Pasada Program as funds for the program would come from the proceeds of fuel excise taxes.
“There is a subsidy. We are studying if we would also suspend that,” he pointed out. – With Mary Grace Padin