Tax plan to shield poor from higher fuel taxes — economic managers

The comprehensive tax reform program of the government is designed to shield the poor from the impact of higher excise fuel taxes, the country's economic managers said on Monday.

"To mitigate the impact of higher oil prices on low income and vulnerable households, we will use highly targeted transfer programs to ensure that the poorest 50 percent of the population is fully protected from the increase in oil excises, while the next 30 percent, which covers the commuting class, will be protected through indirect subsidies to public utility vehicles,” the Department of Finance said in a statement.

It was signed by Finance Secretary Carlos G. Dominguez III, Budget and Management Secretary Benjamin M. Diokno, and Socioeconomic Planning Secretary Ernesto M. Pernia.

The government is looking at raising the excise tax on gasoline to P10.00 per liter from P4.35, and imposing P6.00 per liter on diesel – which currently has no excise tax.

"Increasing excise on oil products is highly progressive as the top 2 million households, which  comprise 10 percent of the total number of households in the country, consume almost 60 percent of oil products, while the top 200,000 households  or 1 percent of total,  consume some 20 percent of oil products," according to the statement.

The economic team presented in June the administration's 10-point socioeconomic agenda which includes a progressive tax reform package supposedly to increase revenue and lower personal and corporate income taxes.

The first package of proposals – reducing the personal income tax (PIT) and expanding the value-added tax (VAT) base – was submitted to Congress in September.

Adjusting the excise taxes on oil would remove the fuel subsidy that has been enjoyed mostly by the rich, while transforming this in the form of "highly-targeted assistance" to low-income households and other vulnerable sectors, Dominguez noted.

“The incremental revenues will be used to fund the massive infrastructure needs of the country and the programs to develop our human capital and provide social protection for the poor,” he added. — Jon Viktor Cabuenas/VDS, GMA News