Monthly ayuda until yearend to make up for retaining fuel excise tax
President Rodrigo Duterte offered very little relief from skyrocketing fuel prices Wednesday, rejecting mounting calls to suspend the excise tax on oil products and offering instead a P200-per-month subsidy to poor families for the rest of the year—or the equivalent of only P6.66 a day.
Acting Palace spokesman Martin Andanar said the President turned down the proposal to suspend the excise tax on fuel, saying the subsidy for poor families was “a more equitable response” since lowering the price of gas and diesel by cutting taxes would only benefit “richer people” who have cars.
The explanation did not take into account the owners of 4 million registered motorcycles in 2021 who also need to gas up.
“President Duterte has approved of the Department of Finance’s recommendation to retain the fuel excise tax under the Tax Reform for Acceleration and Inclusion (TRAIN) Law amid the continuing increase of oil and petroleum products prices,” Andanar said.
The DOF had argued that suspending excise tax on fuel provided under the TRAIN Law will result in a loss of P105.9 billion in government revenues that could be used to fund several administration programs.
Andanar said the President instead approved the DOF recommendation to provide P200 in monthly subsidies or ayuda to poor households for one year, at a cost of P33.1 billion.
Andanar said the President made the announcement during his Talk to the People address late Tuesday night.
Several senators criticized the government’s approach.
“Coming in after 11 weeks of successive oil price increases, the government’s P200 per month cash assistance to poor families is a pittance,” Poe said in a statement. “At P6.66 per day, it can’t even get one a jeepney ride to the minimum distance.”
Senator Panfilo Lacson, who is running for president, said the P200 subsidy was too small and said excise taxes should be suspended until Russia’s war in Ukraine deescalates.
“Just suspend the excise taxes for three months until the conflict between Russia and Ukraine deescalates because that’s the primary cause of the fuel price increases. The war is after all not permanent,” he said in Filipino.
Senator Francis Pangilinan, who is running for vice president, said the cash assistance was too miserly, given the amount the government earns from the excise tax on fuel products.
According to the DOF, he said, excise tax collections on fuel products came to P143.9 billion in 2021 while the value-added tax on gasoline reached P3 billion in the first two months this year alone as a result of the continually rising prices.
“How can the government stomach earning this much while squeezing the poor?” he said in Filipino.
He said the daily subsidy of P6.66 wouldn’t even be enough to buy an egg.
“Again, we call for the suspension of the excise tax on fuel. The prices will go down and everyone would benefit. This would lighten, even if just by a little bit, the day-to-day hardships our countrymen endure,” he added.
All it would take to obtain this relief, he said, was President Duterte’s signature.
But Finance Secretary Carlos Dominguez, who was present during Tuesday’s Cabinet meeting, said the P200-a-month subsidy for the poor was the best the government could do for now.
“This is something that we can sustain, and this is something that we can afford as of this time,” he said.
“Suspending the fuel excise tax under TRAIN would reduce government revenue by P105.9 billion in 2022,” he added.
“If we suspend this, and we don’t collect it, what will happen is our debt-to-GDP (gross domestic product) ratio will go up from an estimated 7.7 percent to 8.2 percent. If we continue to spend the same amount of money, we will have to borrow more money, and that will bring up our debt-to-GDP ratio to about 61.4 percent,” he said.
Dominguez said the depletion in revenues would imperil the government’s currently strong fiscal position and further widen the budget deficit, especially at this time when global interest rates are rising. He also said this would force the government to borrow more to fund its programs intended to provide improved social services, create more jobs and invigorate the economy.
Dominguez said the P200-a-month subsidy would go to the bottom 50 percent of all households or about 74.7 million Filipinos.
“We realize that this is not enough. But this is what we can afford as of this time, and to make sure that our finances going forward and especially for the next administration are still going to be healthy. This, I believe, is what we can afford,” Dominguez said.
He said the P33 billion in cash subsidies would come from higher value-added taxes collected as a result of higher fuel prices.
The excise tax on gasoline before the implementation of the TRAIN Law was P4.35 per liter, while there were no excise taxes collected from diesel, kerosene and liquified petroleum gas.
This tax remained unchanged from 2005 to 2017, even when the prices of petroleum products increased.
But under TRAIN, the excise tax rates were raised to include all fuel products.
The current rates for the major petroleum products are P10 per liter for gasoline, P6 per liter for diesel, P5 per liter for kerosene, and P3 per liter for LPG.
These excise taxes are fixed on a per liter or per kilogram basis and do not change with the cost of fuel.
At the same Cabinet meeting, the Department of Transportation said it opposed petitions to increase the fare in public transportation, saying this would raise the inflation rate.
Transport Secretary Arthur Tugade acknowledged the statement of Socioeconomic Planning Secretary Karl Kendrick Chua that increasing the minimum jeepney fare and minimum wage would mean an increase in the country’s inflation rate to 5.1 percent.
On Wednesday, the Land Transportation Franchising and Regulatory Board (LTFRB) said about 35,000 out of 136,000 drivers and operators of public utility vehicles (PUVs) have received the P6,500 fuel subsidy to cushion the impact of high fuel prices.
LTFRB executive director Maria Kristina Cassion said the expect the Land Bank of the Philippines will complete the distribution by Friday.
Agriculture Secretary William Dar, meanwhile, said a P3,000 fuel subsidy for farmers and fishermen would be distributed starting Thursday, March 17. About 160,000 farmers and fishermen will receive a P3,000 fuel subsidy from the government to ease the impact of the series of fuel price hikes.
The Department of Energy (DOE) said an oil price rollback of P12 per liter for diesel and P5 per liter for gasoline was possible next week as world oil prices declined sharply early this week.
Energy Secretary Alfonso Cusi said the lockdown in China because of COVID-19 with projections of lower demand and the ongoing talks between Russia and Ukraine tempered oil price increases globally.
He said gasoline has gone up by P31.85 per liter, diesel by P40.35 per liter and kerosene by P32.93 per liter, and cooking gas or LPG by P20 per kilo since January.
He also said there is enough oil supply despite the uncertainties brought about by Russia’s invasion of Ukraine.