DoE also mulls VAT suspension for oil products

Published October 21, 2021, 2:59 PM

by Myrna M. Velasco

Aside from planning to temporarily stop the collection of excise taxes, the Department of Energy (DOE) is also studying the possibility of suspending the imposition of value added taxes (VAT) for petroleum products.

If the pass on of 12-percent VAT — which is another layer of taxes enforced on petroleum products — will be stopped momentarily, gasoline prices will be further reduced by P7.80 per liter at current prices of P65 per liter; while diesel could be lowered by additional P6.12 at current average price of P59 per liter.

Energy Secretary Alfonso G. Cusi during a Senate hearing admitted that this is a new proposal that the DOE is currently contemplating on, because the initial recommendation he discussed with Finance Secretary Carlos G. Dominguez III had just been the interim deferment of excise taxes for oil commodities.

The DOE chief said the energy department is seeking “a provision to allow us to do something, suspending the excise tax and VAT.”

He qualified though that the impact of such temporary scrapping of VAT and excise taxes levied on petroleum commodities is being re-evaluated “because the government need to fund projects and services, so we are studying it.”

Meanwhile, Senator Imee Marcos recommended that instead of suspending VAT collection entirely, an option that the DoE must explore is to have it temporarily discontinued for the public transport only –primarily for jeepneys and tricycle drivers.

“The suspension shall just be for PUVs (public utility vehicles), because the financial burden of our drivers is already that heavy – so we should think about it, that instead of the whole subsidy program…perhaps, the suspension merely for PUVs would be a great help,” the lawmaker stressed.

She similarly emphasized that the ‘cease-collection’ move on excise taxes and VAT can already be exercised within the jurisdiction of the Executive Branch and it can invoke the ‘state of emergency’ provisions of the Bayanihan Act.

Taking off from that premise, Marcos emphasized that there will no longer be a need to amend laws – whether the Bayanihan Act, the Expanded VAT Law or the Tax Reform for Acceleration and Inclusion (TRAIN) Act for that purpose.

“The suspension of excise tax is with the Executive Department, there is no need for legislative action. The state of emergency (under the Bayanihan Act) has not been repealed, certainly this is a mere suspension – there’s no amendment of the excise tax and perhaps, we could also look into the VAT imposition,” Marcos further explained.

Beyond the stoppage of tax collections, Cusi reiterated that one measure the energy department would critically need is the enforcement of ‘fuel cost unbundling’ or the segregation of cost components being passed on by the oil companies at the pumps.

The DOE chief cited the energy department’s observation that when global oil prices were at $87 per barrel in 2018; diesel prices had just been at P49 per liter. But at current $85 per barrel of crude oil, diesel prices have been at the level of P59 per liter or a difference of roughly P10 per liter.

Gauging from that, Cusi stated that the DOE would want to establish where that huge pricing disparity has been coming from – if that ‘cost difference’ has been turning in as ‘take’ or profit of the oil industry players.

“Of course, we are not accusing the industry players, but we need to be transparent- and that’s the reason why we wanted that price unbundling. So all of these will help us protect the interest and make it equitable to suppliers/consumers,” the energy chief asserted.

 
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