The government will borrow additional money if fuel tax is suspended, according to DOF.
DOF — The Department of Finance said that the government would need to borrow additional money from creditors should the taxes on petroleum products are suspended.
According to Finance Secretary Carlos G. Dominguez III, suspending fuel excise taxes will only provide minimal and temporary relief to consumers, but entails a detrimental impact on the government’s fiscal position.
Dominguez also noted that suspending oil taxes would bring down prices of goods by only 0.03 percentage points in 2022, but it will hamper the economic recovery and will result in a slower growth by 0.4 percentage points in the short run and 0.03 percentage points in the long run.
He added that the estimated loss of PHP 105.9 billion in excise tax and value-added tax (VAT) collections this 2022 alone already accounts for the possible impact of the Russia-Ukraine conflict on the volume of imported petroleum products.
From 2022 to 2032, the Philippine government stands to lose PHP 1.76 trillion worth of excise revenues, which could be better spent on more productive sectors of the economy.
“Any reduction in our revenues will require us to borrow more to continue to fund government programs,” Dominguez said.
Dominguez also said that the projected PHP 147 billion to be collected from the fuel excise tax and the VAT on oil imports this 2022 is already allocated in the 2022 national budget.
This means that such revenues have been allotted for spending on government programs and projects — including job-generating projects under the “Build, Build, Build” infrastructure modernization program, as well as the salaries of government employees such as soldiers, public school teachers, and members of the Philippine National Police (PNP).
“Without these revenues, we will be required to borrow more to fund government programs,” Dominguez said.
The Duterte Cabinet’s Economic Development Cluster (EDC), which the finance chief heads, is recommending the distribution of cash grants to the bottom 50% of all Filipino households, which will benefit around 74.7 million Filipinos or 12.4 million families.
According to Dominguez, the beneficiaries will be based on the updated list of the DSWD (Department of Social Welfare and Development) and will be similar to the unconditional cash transfers (UCTs) provided under the TRAIN Law.
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Dominguez also said that the budget for the UCTs will amount to PHP 33.1 billion based on a proposed PHP 200-per-month grant or PHP 2,400 per year to be given to each qualified household.
The Economic Development Cluster has also recommended doubling the budget for fuel subsidies from the current PHP 2.5 billion approved by the President to PHP 5 billion in order to cushion the impact of the oil price hike on over 377,000 qualified PUV (public utility vehicle) drivers in the transport sector.
Also, it has proposed providing additional fuel vouchers for fisherfolk and farmers by increasing the budget from PHP 500 million to PHP 1.1 billion in order to help mitigate the impact of higher fuel prices on production and transport costs of fishery and farm products.
Based on a report on Manila Bulletin, the 1st tranche of this amount will be released in March and the 2nd tranche will be given in April.
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