By Kenneth Christiane L. Basilio, Reporter
THE HOUSE of Representatives on Wednesday passed on second reading a bill authorizing President Ferdinand R. Marcos, Jr. to suspend or cut excise taxes on fuel and other petroleum products.
This comes a day after the House Committee on Ways and Means first took it up as lawmakers aim to equip the federal government with tools to rein in surging oil prices.
In a voice vote, lawmakers approved House Bill (HB) No. 8418, which sought to supply the President with the facility to suspend or reduce excise taxes on petroleum products during national and global emergencies for not more than six months.
The measure would allow the federal government “to reply promptly to extraordinary fuel price volatility and stabilize domestic fuel prices through the period of severe economic disruptions.”
The bill’s approval comes because the Iran war stretched into its 12th day, with the conflict driving oil prices higher after Tehran choked off energy shipments from the Middle East sailing through the Strait of Hormuz, an important waterway where a fifth of worldwide oil and gas supplies pass.
As a net importer of oil, the Philippines is very sensitive to sharp fluctuations in global oil prices.
Under the bill, the President may suspend or reduce the gathering of excise taxes on petrol if the typical Dubai crude oil price based on Mean of Platts Singapore benchmark reaches or exceeds $80 per barrel for a month preceding the issuance of the suspension or reduction order. The Development Budget Coordination Committee could have to present the advice to the President.
Any order suspending or reducing excise taxes resulting from emergencies or calamities have to be certified by the Energy secretary, confirming that pump prices have surged “extraordinarily” consequently of the calamity, the bill read.
“The suspension could also be applied to specific petroleum products and will be implemented either as a full suspension or partial reduction,” the measure said.
The Philippines imposes an excise tax of P10 per liter on gasoline, P6 per liter on diesel and P5 per liter on kerosene under the 2017 Tax Reform for Acceleration and Inclusion law. It previously allowed the federal government to suspend the gathering of excise tax on petrol when world oil prices reach $80 per barrel for 3 straight months, but that provision lapsed six years ago.
Any suspension or cut within the fuel excise tax rate may very well be prolonged beyond six months through a joint congressional resolution, in accordance with HB No. 8418. Any extension cannot last more than a 12 months, it added.
The bill also requires the President to undergo Congress inside 15 days of issuing such an order a “factual basis” for halting or cutting the excise tax of petrol, including estimates of foregone revenue and the impact on inflation, fuel prices and economic activity, with monthly reports to follow.
The President may only suspend or reduce excise tax collections on fuel products until Dec. 31, 2028, it added.
In the course of the plenary, Marikina Rep. Romero “Miro” S. Quimbo, who heads the House Committee on Ways and Means, said lawmakers opted to present the President power to suspend fuel excise taxes until 2028 so that they would have standby authority to quickly mitigate oil crises.
“We don’t understand how long wars within the Middle East will last,” he said in Filipino.
Projections from the Finance department showed suspending excise tax collections could end in P136 billion in foregone revenue, which can further widen the federal government’s budget deficit and lift the country’s debt.
Department of Economy, Planning, and Development Secretary Arsenio M. Balisacan had said revenue losses from the suspension of excise taxes on petrol could reach P43.3 billion if the suspension lasts three months, and P106 billion if prolonged until September.
“The loss of presidency revenue, even when painful, is not going to immediately bring down our economy,” Mr. Quimbo said. “That is for the well-being of the people.”
Funding for presidency programs, particularly aid for groups vulnerable to the Middle East conflict, will take an initial hit under the proposal, with the impact on state funds expected to deepen the longer the war drags on, said Leonardo A. Lanzona, an economics professor on the Ateneo de Manila University.
“The hot button is how long this crisis can be,” he said in a Facebook Messenger chat. “If this is brief, the excise suspension can provide some temporary but mainly marginal relief.”
“But when the crisis becomes longer, the negative effects of reducing or suspending the excise tax can be significant,” he added.
John Paolo R. Rivera, a senior research fellow on the Philippine Institute for Development Studies, said the federal government should pursue targeted tax relief as a substitute of sweeping measures, warning broad tax cuts could widen the budget deficit.
“The very best response is to limit the tax relief to periods of utmost oil shocks, pair it with spending reprioritization, and strengthen collection efficiency in other areas akin to value-added tax, customs and digital taxation,” he said in a Viber message. “It might also help to focus support on essentially the most affected sectors akin to public transport and agriculture relatively than subsidizing all fuel users.”