Planned reform to slightly increase excise taxes of poor families, says DOF

The Department of Finance ( DOF) expects a minimum increase in the excise tax payments of lower income Filipinos should the first package of the Comprehensive Tax Reform Program (CTRP) be approved by the Congress.

“Lower-income households will see a minimal increase in excise tax payments compared to richer households,” Finance undersecretary Karl Kendrick Chua said.

In particular, Chua said the lowest 10 percent of households would only see a P160 increase in excise tax payments per year compared with the P4,316 annual increase expected for the richest 10 percent Filipinos.

“This is an indicator of a highly progressive tax,” Chua said.

The DOF said the proposed adjustments in the oil excise tax under the proposed tax reform program would stop subsidies on the fuel consumption of rich households.

“This is a highly progressive tax because we would be removing subsidies on the fuel consumption of the top 10 percent of households with monthly incomes of around P115,000 and above who consume almost 51 percent of fuel in the country,” Chua said.

He also pointed out the richest one percent of households, with monthly income of around P293,000 each, account for around 13 percent of the fuel consumption in the country.

Instead of indirectly subsidizing the rich, the DOF said the proposed increase in oil excise tax would bankroll the government’s infrastructure program that would create more jobs, boost productivity and sustain high growth.

The agency said the additional revenue collected from the increase would also be better spent on the targeted transfer programs aimed for about 10 million poor and vulnerable households that would be affected by the tax hike.

Adjustments under House Bill 4774 filed by Dakila Carlo Cua would be staggered both for diesel and gasoline and other petroleum products from 2017 to 2019.

From 2020 onwards, the taxes would be indexed by four percent to account for inflation.

“Under the bill, there shall be no increase or indexation for the year if the average Dubai crude oil price in the month preceding the scheduled indexation exceeds $ 100 per barrel,” Chua said.

In midst of concerns from different sectors of the society, Chua said history has showed that the domestic economy would be able to weather these tax adjustments.

“Despite concerns raised by the industry that higher taxes or higher prices could lead to lower economic growth and skyrocketing inflation, historical data show that the country’s economy weathered the shocks quite well, even despite the relatively poorer shape it was in prior to these shocks,” Chua said.

“Today, with a much stronger economy, our country can easily withstand the increase,” he added.