Gov’t losing P145b from non-adjustment of fuel excise taxes: DOF

May 10, 2017

Non-adjustment of fuel excise taxes for the past two decades has cost the  government an estimated P145 billion annually in foregone revenues (in 2016 prices) or about  one percent of gross domestic product, the finance department said in statement Wednesday. Finance Undersecretary Karl Kendrick Chua said at Wednesday's public hearing of the House committee on appropriations the government has proposed to correct this by adjusting fuel excise tax rates, along with a proposal to significantly lower personal income taxes to offset such impact of the higher taxes on petroleum products. Chua said contrary to the erroneous perception being foisted upon the public by certain quarters,  higher oil taxes will be absorbed mainly by  affluent families, and not by the poor and low-income ones, because the wealthy, or the country’s top 10 percent, consume 51 percent of oil products, while the top one percent use up 13 percent, or the same share as those in the bottom 50 percent of the population. “The extra income from higher fuel taxes, which will be collected mainly from rich consumers, will be used for targeted transfer programs and other social welfare benefits for the poor, including a modernization program for public utility drivers,” Chua said. Chua said public utility operators and drivers will benefit from the proposed modernization program as they will get to earn more by shifting to better, environment-friendly engines that use less fuel. Chua said studies show that public utility vehicles shifting to the more fuel-efficient Euro4 engines will have 77 percent better fuel economy and raise driver take-home pay by 69 percent and driver-operator pay by 35 percent. Cumulative savings from lower fuel use as consumers conserve fuel can reach P935 billion between 2018 and 2027, more than fully offsetting the tax, Chua said, citing data from another Clean Air Asia study. He said cheap cost of gasoline and diesel contributes to wasteful use of fuel that aggravates traffic, which costs an estimated P2 billion in business losses daily and a 33 percent drop in productivity in Metro Manila alone as most commuters spend an average of 3 hours on the road. Curbing this wasteful use of fuel would reduce air pollution and other health hazards, especially among PUJ drivers, spawned by continued use of fossil fuel in the transport system. Chua said reducing air pollution from vehicle emissions by modernizing public utility vehicles will lead to savings on health care of P16.7 billion and environmental savings of P1.1 billion per year. “After 15 years of operation, each public utility jeepney, for instance, will save  P3 million in fuel, health, and environmental costs. Minibus and bus savings are higher at P8 million and 12.7 million, respectively,” he said, citing the above-mentioned studies. “The entire program can generate P750 billion in fuel, health, and environmental savings in present value terms,” he added. Adjusting fuel excise tax rates is among the provisions of House Bill 4774. the Tax Reform for Acceleration and Inclusion Act filed by Quirino Rep. Dakila Carlo Cua, who chairs the House committee on ways and means. DMS