The Secretary of the Department of Finance, Benjamin E. Diokno, issued a warning on Tuesday regarding the suspension of collecting VAT and excise tax on petroleum products. He stated that the government could potentially lose up to P73 billion in revenue in the last quarter.
According to Mr. Diokno, this suggestion could have negative effects on the country’s financial situation and overall economy. He believes it is not well thought out and may lead to serious repercussions.
“Any of the proposals will adversely affect our economic and fifi
He stated that the proposal mainly benefits the wealthy and does not offer long-term relief from inflation.
According to Mr. Diokno, the government is anticipating a decrease in revenue of P72.6 billion, which is equivalent to approximately 0.3% of the country’s GDP, during the months of October to December. This decline is projected to consist of P41.4 billion from excise taxes and P31.2 billion from VAT taxes.
The ratio of citizen-to-GDP will rise from 6.1% to 6.4%. This will also lead to a greater proportion of public debt in relation to GDP, increasing from 61.4% to 61.7%,” stated the speaker.
The ratio of citizen’s income to GDP was 4.8%, while the ratio of debt to GDP was 61%.
Mr. Diokno stated that if the fuel tax collection is put on hold for a full year, the country would suffer a significant loss of P280.5 billion or 1.1% of its GDP in 2024.
He observed that this would result in a larger deficit compared to the GDP, specifically 6.2% in 2024 instead of the expected 5.1%; and a higher debt compared to the GDP, specifically 61.3% instead of the projected 60.2%.
If we do not address the situation, there is a possibility of a credit downgrade on an international scale. This could lead to a higher risk premium for government loans, resulting in increased debt servicing. Private sector loans will also become more expensive, which could have a detrimental effect on private investment and the overall economy, according to Mr. Diokno.
On Monday, members of the House of Representatives suggested temporarily halting fuel taxes in response to increasing gas prices. However, only the President has the power to suspend excise taxes on fuel.
Politicians often favor the elimination of taxes, but passing a law to do so can be a slow process. Additionally, if oil prices decrease after the fact, reinstating taxes on oil products may prove difficult as it is not a popular decision among voters. This is known as the political aspect of tax legislation, and it can have significant consequences for the economy.fi
According to Mr. Diokno, sustainable scalability is crucial.
The uppermost 10% of households are responsible for approximately 49% of all fuel usage, while the lower half only consumes around 10%, according to his statement.
Instead of halting taxes, the Department of Finance leader suggested that the government offer specific financial assistance to the industries most impacted by soaring fuel costs.
In February of 2022, the government provided financial assistance to public transportation drivers who were impacted by the increase in fuel costs caused by Russia’s invasion of Ukraine.
th time this year that oil companies increased pump prices.
Oil companies increased pump prices on Tuesday, with gasoline increasing by P2 per liter, diesel by P2.50 per liter, and kerosene by P2 per liter. This was the 11th price hike for oil companies this year.th th consecutive week for gasoline
Diesel and kerosene have both seen a rise for the 7th week in a row, while gasoline has experienced an increase for the 10th week in a row.th week for gasoline.
During the period of the second week of July to the third week of September, the cost of gasoline has increased by P11.85 per liter, diesel by P17.30 per liter, and kerosene by P15.94 per liter.
The Secretary of the National Economic and Development Authority (NEDA), Arsenio M. Balisacan, stated to BusinessWorld that the suggestion to halt fuel taxes is unjust.
If you provide financial assistance for gasoline, it can be seen as a kind and charitable act.fi
Disproportionately taxing the wealthy is not an effective method of providing subsidies for the poor. Instead, it would be more beneficial to focus on targeted programs that provide safety nets for the poorest groups and increase subsidies for jeepneys and tricycles. This approach is more practical, sustainable, and fair, according to Mr. Balisacan during the House of Representatives budget plenary on Tuesday.
According to a Viber message from Michael L. Ricafort, Chief Economist at Rizal Commercial Banking Corp., completely suspending taxes on fuel would be expensive and would take away funds from other government aid programs for the most impoverished individuals, similar to the situation last year.
He observed that the legislators’ suggestion would affect the tax income of the government and potentially increase the deficit in the budget.ficit.
“Implementing such a action would provide instant relief for consumers, but it would also have an impact on fiscal balances. This could lead fiscal authorities to compensate for the loss of revenue through alternative methods or by redirecting funds from other programs. It could also potentially result in increased government borrowing, ultimately causing a rise in interest rates,” stated Nicholas Antonio T. Mapa, Senior Economist at ING Bank N.V. Manila, in an email.
According to the most recent information from the Bureau of the Treasury, the budget deficit of the National Government decreased by 44.89% to P47.8 billion in July compared to P86.8 billion in the same month last year.
Mr. Ricafort suggested that it would be more beneficial for the government to offer specific fuel subsidies to the most at-risk sectors.
Senator Koko Pimentel III stated that the suspension of fuel excise tax could provide relief to many Filipinos who are struggling with the increasing cost of gasoline.
“Our fellow citizens require a ‘rescue vessel’ to confront the obstacle of continuously rising fuel costs.” – Luisa Maria Jacinta C. Jocson