A BUSINESS CHAMBER is cautioning the Department of Finance (DoF) on the impact on companies of its push to hike the excise tax on fuel, warning this could erode their competitiveness.
The department is pushing a five-pronged program that aims to make the country’s tax system more progressive while yielding more revenues, and an increase in fuel excise taxes forms part of the first package that was submitted to Congress in September 2016.
“I just want to remind them (DoF), to remember how this would impact our competitiveness,” George T. Barcelon, president of the Philippine Chamber of Commerce and Industry, said in an interview on Tuesday evening, noting that fuel and electricity -- provided by power plants that may run on fuel -- are a key input cost of most businesses.
“It depends on the industry,” Mr. Barcelon said yesterday by phone. “Some are highly power-intensive, like the steel industry. I’m in the plastic industry. I can say for myself, we’re probably between eight to nine percent.”
Under DoF’s first tax reform package, diesel will be taxed P6 per liter, while the levy on gasoline will more than double to P10/liter from P4.35/liter currently, on top of the 12% value-added tax.
The department has noted that the current gasoline excise tax rate has not changed in the last two decades while diesel has been tax-exempt for the last 12 years.
“These rates, which have not been corrected to account for inflation, have led to a massive foregone revenue loss of about P145 billion (in 2016 prices), which represents over one percent of the GDP (gross domestic product),” a DoF statement yesterday quoted Finance Undersecretary Karl Kendrick T. Chua as saying.
Mr. Barcelon said businessmen have balked at the tax proposal -- especially the one on diesel which “seems to be quite a big jump.”
“From the position of the business community, the smaller the amount, the better,” he said.
“Diesel is part of cost input,” he noted, saying the new tax will jack up companies’ “cost of transportation.”
Other firms, Mr. Barcelon added, have power generator sets that run on diesel, so “of course, that will increase their electricity rate, cost of operation would go up.”
“So we hope that maybe the increase can be contained.”