Amid calls to suspend not just oil excise taxes but also oil value-added tax (VAT), the suspension of excise taxes on liquefied petroleum gas (LPG) and kerosene appears to be a tokenistic measure to deflect from the bigger oil tax cuts demanded by transport workers and a broader public burdened by rising prices.
Looking at the poorest 14 million families corresponding to those who said they were poor even before the oil price shocks, just 7.1 million or barely half (51%) are actually LPG users, which means that 6.8 million or around half (49%) of the poorest will not get any benefits at all from the excise tax cuts.
Even LPG users will not really get much benefits. They only buy four to six 11-kg LPG tanks a year which means that the excise tax cuts will save them just a puny Php13-18 monthly on average even if the cuts were kept for a whole year. The domino effect on the prices of other goods and services bought by the poor is minimal, perhaps restricted to carinderias or restaurants.
The kerosene cuts are even more ineffectual because less than a million of these poorest 14 million families use kerosene, with actually just around 1.3 million families using it nationwide.
In contrast, still looking at the poorest 14 million families, there are more gasoline users at 7.5 million families aside from over 400,000 diesel users. If excise taxes were cut here as well, the poorest users would get larger direct savings of Php37-70 monthly on average aside.
Beyond this they should also get much larger indirect benefits from the pass through of cheaper fuel into cheaper food, transport and utilities. IBON estimates that the poorest 14 million fuel and non-fuel consuming families could get savings of between Php450-550 monthly if excise taxes are cut on oil excise and VAT.
It’s these indirect benefits that the Department of Finance (DOF) obscures when they say that 85% of diesel is consumed by the top 30% of households. Why not consider that much more diesel is used by the country’s 3.4 million trucks, trailers, buses and utility vehicles? They certainly consume many times more than, for instance, just 1.1 million SUVs in the country.
This is in effect quick-disbursing and recurring relief for the country’s poorest and low-income families that can be supplementary to other urgent cash assistance and fuel subsidies. This will also benefit over 12 million middle class families.
The social distress that hundreds of thousands of families are already feeling and that millions more will feel in the months to come should be more important to the government than revenue losses and misplaced worries about credit ratings. The crisis will deepen and it is incumbent on the administration to raise revenues for urgent social interventions with a billionaire wealth tax, windfall tax on corporate profits including of oil firms, and taxes on luxury goods. Higher income taxes on large corporations and high-income families should also be considered because they can contribute so much to helping millions adjust to the severe price and livelihood shocks.