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Friday, March 29, 2024

DoF pushes higher oil taxes

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The Finance Department is pushing for higher excise taxes on gas, diesel and other oil products under the proposed Comprehensive Tax Reform Program for the incoming Duterte administration.

Finance Secretary Cesar Purisima said in a presentation before the American Chamber of Commerce’s general membership meeting the government would raise P101 billion in additional revenue if the current excise tax on fuels would be raised to P10 per liter of gasoline and P6 per liter of diesel products.

“Increasing the excise tax on gas, diesel and other oil, triggered and pegged with oil prices, ought to generate P101 billion, and not to mention will also fulfill our environmental objectives given the existential threats climate change poses to our world,” Purisima said.

Petroleum products are taxed in varying rates ranging from zero to P4.50 a liter or kilogram.

No upward adjustments in excise tax rates have been made since 1997 and the rates have been fixed in nominal terms, reduced or eliminated.

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The Finance Department said a P10-per-liter proposed tax rate was derived by indexing the existing excise tax rate of gasoline (P4.35/liter) to cumulative inflation factor of 2.37 (1997-2014). The same formula was used for the proposed P5.96 tax rate on diesel.

“For simplicity and admin ease, the P5.96 was rounded off to P6,” Purisima said.

Excise tax rates will be indexed by 4 percent every year, according to the DoF. A subsidy would be provided if crude oil price reached more than $90 a barrel.

Aside from P101 billion, another P134 billion to P210 billion was also expected to be generated if the CTPR program would be implemented by the next administration, according to the agency.

The agency proposed the oil tax increase to compensate for the proposed reduction in corporate income tax rate to 25 percent from 32 percent and exemption of incomes of P1 million and below. The income tax reduction proposal was seen to reduce collection by P158 billion to P222 billion.

“We estimate it would cost up to P222 billion. Lowering corporate income tax rates from 32 percent to 25 percent ought to reduce…our revenues, but it ought to make for a more competitive Philippines in Asean,” Purisima said.

The losses should be offset by the increase in excise taxes on gas, diesel and other oil products.

Other sources of revenue increase are the expansion of the value added tax base and the increase in the income tax rate from 12 percent to 14 percent. This particular measure is expected to gain additional P162-billion revenues for the government.

The department also wants to make tax evasion a predicate crime to money laundering and the lifting of Bank Secrecy Law.

“Making tax evasion a predicate crime to money laundering and repealing Bank Secrecy [law] for the BIR ought to add P210 billion, but I think we ought to make them one package to make it feasible,” Purisima said.

“From all these, our studies project… total revenue gain of up to P320 billion, just for the first year. Of course, there ought to be triggers for many of these things to happen. For example, tax to GDP ratio needs to hit a certain level before the tax rates decrease by certain percentage points, over time,” he said.

DOF also pushed for the equalization of the tax treatment of self-employed professionals with corporate taxpayers.

“Perhaps equalizing the tax treatment of self-employed professionals with corporate taxpayers ought to help compensate, with an expected gain of P2 billion,” Purisima said.

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