AUTO INDUSTRY NEWS

Proposed excise tax to add at least 3 Pesos to gas, diesel prices

Proposed excise tax to add at least 3 Pesos to gas, diesel prices image

Eric Tipan / AutoIndustriya.com | January 25, 2017 12:24

House Bill 4774 to add more excise tax to fuels and petroleum products

Aside from the proposed excise tax on automobiles, House Bill 4774 also has a stipulation that will increase the price of fuel and all other petroleum products should it pass both chambers of congress and get the President Rodirigo Duterte's signature.

Authored by Rep. Dakila Carlo Cua of the lone district of Quirino, the bill is an amendment to ‘The National Internal Revenue Code of 1997’ and proposes the acceleration and inclusion of excise tax on all petroleum products among other things.

It should be noted that a reduction in personal income taxes is included in the bill although the government will make up for it by expanding the coverage of value-added tax (VAT) and by added excise taxes on petroleum products and automobiles.

Based on an amended version of the Department of Finance (DoF) tax reform proposal last year of slapping a one-time Php 6 levy per liter of diesel fuel an in order to reflect a long overdue adjustment for inflation and a PhP 10 levy per liter for gasoline from Php 4.35.

While there is a provision for the increase of excise tax on 'Leaded Gasoline', which has already been phased out by an Executive Order signed by then president Fidel Ramos to have taken effect January 1, 2001.

Proposed July 1, 2017 effect

The earlier proposal from DoF, leavied higher excise taxes with an annual increase of 10%. The new version filed under the HB4774 now shows a staggered increase in the excise tax for all petroleum products once it becomes a law. Under the new proposed bill, an initial Php 3 will be levied to a liter of diesel, while PhP 7 will be levied on gasoline.

This was done in order to defray the cost of the tax hike over three years in order to reduce its impact on basic goods and commodities, and the overall cost of living of Filipinos. However, the adjustment potentially remains to be significant.

Proposed July 1, 2017 effect

By the following year however, there will be a scheduled increase by Php 2 per liter. Bringing the total levy on diesel to Php 5 per liter, and gasoline to Php 9 per liter.

Proposed January 1, 2019 effect

By 2019, an additional Php 1 is expected to be levied. Php 6 for diesel and Php 10 for gasoline. The bill also stipulates that there will be a 4% increase in excise taxes annually from 2020 onwards.

As mentioned earlier, there will also be an increase in excise tax for other petroleum products such as lubricants and greases, LPG, and kerosene. While not as huge an impact as fuels, these are expected to be an additional burden to motorists and businesses which rely on these products as well.

If passed, the new excise taxes on fuel and automobiles may very well be government's solution to the traffic problem as people will not be buying more cars and using more fuel due to its potentially prohibitive costs. As to how it will affect economic and business activity poses a huge dark cloud of a question.