If global crude prices will linger at $100 per barrel or higher amid the escalating Russia-Ukraine war, the Department of Finance (DOF) is eyeing up to P20.3 billion ‘war chest’ that the national government can funnel as fuel subsidy to critical sectors – primarily to public utility vehicle (PUV) drivers as well as farmers and fishermen.
In a Senate hearing tackling the impact of the protracted war on the country’s oil pricing as well as supply concerns, Finance Assistant Secretary Valery Joy A. Brion indicated that “for the additional subsidies, the strategy would be to use the excess VAT (value added tax) collection, so our projection for when the level is at $100 per barrel, the full year for that would be P20.3 billion.”
For the month of January and February this year, she emphasized that the excess VAT collection of the national government from petroleum products already hovered at P3.0 billion; and that can be channeled also as subsidies to the public transport and agriculture sectors if the “super spikes” in prices won’t ease in the weeks or months ahead.
“We have the figures for the January and February, the additional VAT collections were P3.0 billion...that’s our actual additional excess VAT collection for January and February. That’s based on actual volume,” the finance official said.
Brion specified the average crude price logged for January had been at $83.5 per barrel; while it was at average $92.1 per barrel for February; and “the incremental collection that we estimated was based on the $70 per barrel crude oil price.”
Apart from value added taxes (VAT) enforced on commodities retailed at the petroleum pumps, Brion conveyed that the government also raked in P143.9 billion worth of revenue collections in 2021 for excise taxes levied on oil products.
She stressed the finance department is not amenable to proposals put forward by the Independent Philippine Petroleum Companies Association (IPPCA) and other groups which have been calling for the suspension of excise taxes for petroleum products, instead, the approach will be to re-calibrate the grant of subsidies to the marginalized sectors.
“The government remains ready to provide targeted relief assistance in support to address the impact of the oil price hikes for the affected sectors -- especially the PUV drivers, farmers and fisherfolk,” Brion noted.
Based on recent announcement of the Development Budget Coordination Committee (DBCC), the State has already doubled the level of fuel subsidies to the affected sectors to P5.0 billion for PUV drivers – and that shall be released in two tranches for the months of March and April this year.
Additionally, according to Brion, “the fuel discount for farmers and fisherfolk at P500 million in the February DBCC statement has been doubled to P1.1 billion -- also to be released this month and in April.”
She further qualified “overall subsidies have been increased from P3.0 billion to P6.1 billion,” with her adding that “on top of these P6.1 billion subsidies, additional subsidies are also being studied from additional VAT collections.
When asked by Senate Committee on Energy Chairman Sherwin T. Gatchalian if the P3.0 billion excess VAT collection has been part of the unprogrammed subsidy, the DOF official responded in the affirmative.
The lawmaker opined that given the uncertainty of the situation ignited by the Russia-Ukraine war, “we need to have a war chest to give subsidies, ready to tap into and ready to be given to our drivers, so I’m just trying to understand if we have funds that we can tap into to give as a form of subsidy and P20 billion is what we’re looking at.”