DOF Warns Against Fuel Tax Suspension, Citing P138.8B Revenue Losses

The Department of Finance (DOF) in the Philippines is strongly opposing any suspension of excise taxes on fuel due to concerns over significant revenue losses. According to DOF estimates, suspending all excise and value-added taxes on fuel would result in a loss of PHP138.8 billion ($2.5 billion USD), which equates to 0.6% of the country's GDP for this year alone.

The opposition from the DOF comes as several proposals are being considered by Congress to suspend excise taxes on fuel, amid consecutive price hikes in petroleum products over the past eleven weeks due to geopolitical tensions between Russia and Ukraine.

Specifically, if all excise taxes were suspended from June to November as proposed by the House of Representatives, it would result in a revenue loss of PHP48.7 billion ($902 million USD). If extended until December as suggested by the Senate, this figure increases to PHP69.3 billion ($1.25 billion USD).

The DOF maintains that these tax revenues are crucial for maintaining fiscal stability and supporting economic recovery efforts in the country. They argue that higher VAT collections from rising fuel prices can adequately fund targeted subsidies to vulnerable sectors of the economy.

Instead, the DOF is recommending a distribution of unconditional cash transfers (UCTs) to the bottom 50% of Filipino households, benefiting around 12.4 million families or 74.7 million individuals. The proposed UCT amount would be PHP200 per month or PHP2,400 annually for each qualified household.

Additionally, they propose doubling the fuel subsidy budget from PHP2.5 billion to PHP5 billion to assist over 377,000 public utility vehicle drivers in the transport sector and increasing the fuel vouchers for farmers and fisherfolk from PHP500 million to PHP1.1 billion.