Higher excise tax on oil products looms

INQUIRER file photo

THE DEPARTMENT of Finance (DOF) is pushing to raise the excise tax slapped on oil products as this has remained low and unadjusted to inflation since it was put in place almost two decades ago.

Separately, a study conducted by Manila-based multilateral lender Asian Development Bank (ADB) showed that Filipino consumers have not been feeling an expected pass-through of the global oil price drop in prices of basic goods.

Finance Secretary Carlos Dominguez III told reporters that “now is the time” to adjust excise taxes on petroleum products as fuel costs were low.

Dominguez noted that the prevailing oil excise rate has been the same since 1997.

“We have to adjust it, at least to index it to inflation,” the finance chief said.

Dominguez said the additional revenues to be generated from a higher oil excise tax would be huge, but declined to provide a figure.

Based on the DOF’s comprehensive tax reform package (CTRP) earlier turned over to Dominguez by former finance chief Cesar V. Purisima, an excise tax increase on gas, diesel and other oil products would bring an estimated revenue gain of P132 billion in the first year of implementation.

Gains from indexing oil excise outpaced the estimated P82-billion gain if the value-added tax (VAT) rate would be jacked up to 14 percent from 12 percent at present, as was also proposed by the DOF.

Petroleum products are being taxed at varying rates, ranging from exempt to P4.50 a liter or kilogram, the DOF noted in a report.

The DOF’s proposal is to raise during the first year to P10 a liter the levy on regular gasoline and other products that are presently imposed positive excise tax rates, such as aviation turbo jet fuel, lubricating greases and oils, leaded and unleaded premium gasoline, naphtha as well as petrolatum and waxes.

An increase to P6 a liter, meanwhile, has been proposed by the DOF for diesel as well as other products currently exempt from excise tax, including asphalts, bunker fuel oil, denatured alcohol used for motive power, kerosene, liquefied petroleum gas (LPG) and processed gas.

The DOF proposal also sought an indexation of excise tax rates by 4 percent every year.

The government nonetheless should provide subsidy when crude oil prices hit more than $90 a barrel, the DOF said. – Ben O. de Vera