SUSPENDING the excise tax on fuel will be “detrimental” to the country’s economic recovery and long-term growth, the Department of Finance (DOF) warned.
During the House Committee hearing on the proposed suspension of fuel excise tax on Thursday, Finance Director Euvimil Nina R. Asuncion told lawmakers that the move supported by the Department of Energy (DOE) would not only result in substantial foregone revenues of P131.4 billion next year but would also lead to lower overall economic growth.
While disposable income and consumption may increase and there is inflation relief in the short-term, the overall growth of the economy will be lower, Asuncion said.
“From 2022 onwards, overall economic growth will be lower with the decrease in government spending without the fuel excise tax revenues,” Asuncion said.
Moreover, suspending the excise tax on fuel would see government losing gains in making the tax system more equitable under the Tax Reform for Acceleration and Inclusion (Train) law or Republic Act (RA) 10963, she added.
Instead of the proposed suspension, Asuncion said providing a targeted subsidy to the transportation sector “will be more equitable than removing all fuel excise taxes which may only subsidize the consumption of higher-income households.”
On Monday, economic managers announced the rollout of a P1-billion fuel subsidy for the transportation sector to cushion the impact of increasing oil prices. Government aims to subsidize around 178,000 public transport drivers.
The DOE also asked to be given the power to suspend the excise tax on fuel.
During the same hearing, Energy Secretary Alfonso G. Cusi explained that the suspension of fuel excise tax be triggered if the oil price breaches a certain benchmark but will revert once the price goes down.
The DOF has earlier said that the provision under the Train law cannot be invoked anymore as this has already lapsed and only covered excise tax increases from 2018 to 2020.
Asuncion also emphasized during the hearing that what is being proposed to be suspended now is the full excise tax and not just the excise tax increase, which was previously suspended under RA 10963.
After the hearing, some lawmakers appealed to the DOF to “reconsider” their position to oppose the proposed suspension of fuel excise tax given the increasing oil prices.