A PARTY-LIST lawmaker on Thursday urged the Finance and Budget departments to raise the value-added tax on so-called “sin products” instead of increasing the excise tax on diesel.
Puwersa ng Bayaning Atleta party-list Rep. Jericho Nograles said diesel and other fuel products are basic commodities that have a direct impact on the day-to-day survival of the country’s poor and increasing its cost would run counter to President Duterte’s social reform agenda.
Nograles, vice chairman of the House committee on appropriations, said that imposing higher excise tax on diesel would greatly diminish the purchasing power of Filipino consumer because this would mean higher transport costs and a dramatic increase in prices of goods including basic commodities.
“Increasing excise tax on diesel would have inflationary effects on our economy. Our jeepneys, buses, farm implements, cargo trucks and haulers and even some of our power plants are run by diesel. Imposing a higher excise tax on diesel will mean increased cost in operating these vehicles and facilities. Obviously, all added costs will be passed on to our consumers,” Nograles said.
Nograles said imposing a higher excise tax on diesel is not the right way to go even if he agrees with the observation of the Finance Department that they need to raise revenues to finance the government’s infrastructure spending and other programs intended to fight poverty.
He said increasing the excise tax on diesel “is like punching someone to the ground and then helping him get on his feet to treat him for a free meal.”
“To me, that doesn’t make a lot of sense,” he said.
Nograles also doubted the Budget Department’s claim that diesel consumers can easily absorb the added cost as the price of diesel in the Philippines is still very high compared to other Asian countries.
“Our economic managers should continue to remain faithful to the commitments of President Duterte. The President wants a better life for all Filipinos especially the poor and that’s the track that we should take,” Nograles said.
Instead, Nograles suggested that government economic managers should push for the swift approval of legislative measures that are designed to increase revenues by imposing higher excise and value-added tax on sin products such as alcohol.
He noted that the two-tier tax system on cigarettes as provided RA 10351 or the Sin Tax Reform Act of 2012 is set to be unitary beginning this month.
“For one, the government should see the full implementation of the Sin Tax Law and possibly amend it further to increase government revenues. Creating a special law to further increase the Value Added Tax on liquor and other sin products is a better option than imposing higher tax on diesel,” Nograles said.
Senators were also opposed to a plan to impose additional tax on fuel products on top of the 12 percent VAT.
Saying there is no fiscal crisis, Senate Minority Leader Ralph Recto said he is against the government proposal.
In a statement, Recto noted that the timing is also bad now that oil prices are on the way up.
He suggested that the government just needs to improve tax collection efficiency and stop smuggling.
Senator Leila de Lima said this is not acceptable because it is an added burden to the public. She warned this will lead to fare hike and prices of basic commodities while the “buying capacity” of the public will not increase.
“Are they really mad at the poor? It’s always the poor who are the victims, in the war on drugs, only the poor are the victims. Even in the collection of taxes, will the poor be also the victims?” said De Lima.
She said the government should extensively study this plan because the consequences will be borne by the poorest segment of our society.
“They should likewise disclose where this additional revenue be used,” she said.
“Finally, is this necessary? Last year they dropped the collection targets for BIR and BOC and now they want to impose additional taxes to increase revenue? “ she said.
“Maybe they should focus more on fulfilling the President’s campaign promise to curb corruption in these revenue collection agencies to increase collection efficiency,” De Lima added.
Senator Francis Escudero said they will study the administration proposal, but said offhand, “that seems too much.”
“Also, they would first have to show and prove that: 1) They have exhausted all efforts to collect existing taxes; and 2) They can actually spend that money especially given our experience last year, re, low absorptive capacity.”
Escudero stressed the increase in taxes will far outweigh the net effect of lowering of income tax rates.
When informed about the government’s explanation that the public could afford the additional tax on fuel once their income tax has been reduced, Escudero said the increase in taxes “will far outweigh the net effect of the lowering of income tax rates.”
Senate Majority Leader Vicente Sotto said the government should look at other sources of revenue before imposing on the public.
But Senator Panfilo Lacson said he is inclined to support the Finance Department’s tax package as long as there is a mechanism to cushion the impact on public transport and other freight-related industries.
“Having said that, I need to see how they will put that mechanism in place and find out if it is effective or at least implementable.”