DOF urges caution on fuel tax suspension

Published October 21, 2021, 12:09 PM

by Chino S. Leyco

The Department of Finance (DOF) has advised caution in suspending excise tax on petroleum as it will incur substantial revenue losses for the government and may affect the budget for coronavirus recovery measures.

In a memorandum submitted to Finance Secretary Carlos G. Dominguez III, Finance Undersecretary Antonette C. Tionko said the proposed suspension of fuel taxes would result in P10.95 billion in foregone revenue per month.

“Any suspension of the imposition of excise taxes should be appropriately studied as the revenue to be foregone is substantial and may affect the government’s budget for COVID-19 recovery measures,” said Tionko in her memorandum dated Oct. 20, 2021.

If excise tax on fuel is suspended, the Department of Energy (DOE) estimated that it will lower pump prices by around P8 to P10 per liter. However, the DOF warned that it will cost the government about P131.4 billion in forgone revenues for 2022.

Aside from tax losses, Tionko also pointed out that the proposed suspension floated by Energy Secretary Alfonso G. Cusi has no legal basis as of now.

Cusi earlier cited the provisions under the tax reform for acceleration and inclusion (TRAIN) law as means to stop the imposition of petroleum excise taxes.

Under Republic Act No. 10963, or TRAIN law, excise tax increases can be suspended if the three-month average of Dubai crude oil price based on Mean Of Platts Singapore or MOPs reaches or exceeds $80 per barrel.

However, Tionko said Cusi cannot invoke the TRAIN law to suspend excise tax on petroleum because it was only applicable for the tax increases that already took place on January 1 of 2018, 2019 and 2020.

“Perhaps after realizing that the TRAIN Law” is cannot be involved, Tionko noted that Cusi changed his tune and instead proposed some amendments to the oil deregulation law.

On Wednesday, Cusi asked Congress to grant the DOE an authority to suspend excise tax on fuel.

“We agree that the only possible way DOE may be granted powers to suspend is through legislative means,” Tionko said.

“The DOE, the DOF, or any other agency of the government has no power to suspend the imposition of excise taxes,” she added.

Even President Duterte has not authority suspend excise levy on fuel to mitigate the impact of skyrocketing oil prices, the DOF official said.

 
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