Gov't May Reduce Fuel Excise Tax to Temper Inflation

The Philippine government is open to reducing the excise tax on fuel, with economists maintaining it is more prudent than providing subsidies to vulnerable sectors.

- By Louise Maureen Simeon

"A dramatic increase in oil prices will dramatically increase oil revenue for the government. We may reduce excise tax on fuel to ensure inflation is tempered," Finance Secretary Ralph Recto told The STAR.

"We are studying trigger points. For now, oil prices have dropped," he added.

Staggered fuel price hikes of up to P5 are set this week as Middle East tensions worsened after the United States bombed three Iranian nuclear sites.

De La Salle University economist Maria Ella Oplas said reducing the excise tax on fuel is a short-term option that the government should do.

"It is time for the government to implement prudent fiscal policy," she told The STAR.

Ateneo de Manila University economist Leonardo Lanzona also argued that lowering the excise tax is more viable.

"The decline in rates will be offset by the increase in oil prices, hence keeping total tax revenues constant. The government should not benefit from this crisis while the rest of us suffer," he said.

Excise tax for petroleum products ranges from P3 per liter to as much as P10, according to the Tax Reform for Acceleration and Inclusion Law.

Headline inflation continued its downtrend in May, easing to an almost six-year low of 1.3 percent.

For the five-month period, inflation settled at 1.9 percent, below the government's two to four percent target.