Tax suspension amid government borrowings
>> Monday, April 4, 2022
EDITORIAL
This nation’s
constituents are reeling from effects of rising prices particularly on
fuel.
But suspension of the fuel excise tax would cut into the government’s revenue collection and force more borrowings, causing the national debt to spiral to over 61 percent of the economy, the Dept. of Finance said.
In its analysis, the DOF said the budget deficit would rise to 8.2 percent of gross domestic product (GDP) in 2022 if the government stops collecting excise taxes on petroleum products to weather the oil price hikes.
As a consequence, the government will be left with no choice but to increase its borrowings at a time when financing costs are going up due to the looming US rate hikes and the Russia-Ukraine war in Europe.
Finance Secretary Carlos Dominguez III said the debt-to-GDP ratio would then leap to a 17-year high of 61.4 percent from a projected 60.9 percent. In 2021, the debt level went up to 60.5 percent of the economy, surpassing the 60 percent threshold observed by credit monitors and multilateral lenders.
“The situation is compounded by the rise of interest rates globally. Higher borrowings will further increase our interest payments and(fiscal) deficit in the future,” Dominguez said.
The government stands to lose at least P105.9 billion in revenue, comprised of P94.6 billion in excise taxes and P11.3 billion in value-added tax this year from the suspension of fuel taxes enforced by the Tax Reform for Acceleration and Inclusion (TRAIN) Law.
Dominguez cautioned that suspending the TRAIN taxes on petroleum products for up to 2032 would cost the government an average of P160.3 billion yearly or 0.5 percent of GDP for a total of P1.76 trillion by 2032.
Instead, the DOF chief proposed the government distribute P33 billion in unconditional cash transfer to the poorest 50 percent of the population to mitigate the impact of price surges across fuel items.
He also said suspending the fuel excise tax would only benefit the richest 10 percent of Filipinos expected to account for 48.8 percent of fuel consumption in 2022. He pointed out that the proposed measure would only cut commodity prices by 0.03 percentage point.
He added the suspension of fuel taxes would slash economic growth by 0.4 percentage point in the short run and 0.03 percentage point in the long term.
Foregone revenue resulting from the price intervention would likewise defund projects under the Build Build Build program, Dominguez said.
Through the TRAIN Law, the government charges an excise tax per liter of P10 for gasoline, P6 for diesel, P5 for kerosene and P3 for LPG.
For the year, fuel prices per liter have spiked by P13.25 for gasoline, P17.5 for diesel and P11.4 for kerosene as of March 8, pushing lawmakers to consider the passage of a measure lifting the excise taxes to provide immediate relief to consumers.
But suspension of the fuel excise tax would cut into the government’s revenue collection and force more borrowings, causing the national debt to spiral to over 61 percent of the economy, the Dept. of Finance said.
In its analysis, the DOF said the budget deficit would rise to 8.2 percent of gross domestic product (GDP) in 2022 if the government stops collecting excise taxes on petroleum products to weather the oil price hikes.
As a consequence, the government will be left with no choice but to increase its borrowings at a time when financing costs are going up due to the looming US rate hikes and the Russia-Ukraine war in Europe.
Finance Secretary Carlos Dominguez III said the debt-to-GDP ratio would then leap to a 17-year high of 61.4 percent from a projected 60.9 percent. In 2021, the debt level went up to 60.5 percent of the economy, surpassing the 60 percent threshold observed by credit monitors and multilateral lenders.
“The situation is compounded by the rise of interest rates globally. Higher borrowings will further increase our interest payments and(fiscal) deficit in the future,” Dominguez said.
The government stands to lose at least P105.9 billion in revenue, comprised of P94.6 billion in excise taxes and P11.3 billion in value-added tax this year from the suspension of fuel taxes enforced by the Tax Reform for Acceleration and Inclusion (TRAIN) Law.
Dominguez cautioned that suspending the TRAIN taxes on petroleum products for up to 2032 would cost the government an average of P160.3 billion yearly or 0.5 percent of GDP for a total of P1.76 trillion by 2032.
Instead, the DOF chief proposed the government distribute P33 billion in unconditional cash transfer to the poorest 50 percent of the population to mitigate the impact of price surges across fuel items.
He also said suspending the fuel excise tax would only benefit the richest 10 percent of Filipinos expected to account for 48.8 percent of fuel consumption in 2022. He pointed out that the proposed measure would only cut commodity prices by 0.03 percentage point.
He added the suspension of fuel taxes would slash economic growth by 0.4 percentage point in the short run and 0.03 percentage point in the long term.
Foregone revenue resulting from the price intervention would likewise defund projects under the Build Build Build program, Dominguez said.
Through the TRAIN Law, the government charges an excise tax per liter of P10 for gasoline, P6 for diesel, P5 for kerosene and P3 for LPG.
For the year, fuel prices per liter have spiked by P13.25 for gasoline, P17.5 for diesel and P11.4 for kerosene as of March 8, pushing lawmakers to consider the passage of a measure lifting the excise taxes to provide immediate relief to consumers.
DILG
to mayors, governors: Form
transition teams
THE
Department of the Interior and Local Government (DILG) has reminded all
incumbent governors and mayors to organize their respective Local Governance
Transition Team (LGTT) not later than April 7, 2022.
This is meant for an effective turnover of responsibilities ahead of the May 9, 2022 local and national elections.
DILG Secretary Eduardo M. Año has issued DILG Memorandum Circular No. 2022-029 instructing LGTT to ensure the safekeeping of local government unit (LGU) records and documents and the protection of LGU assets during the election period, and guarantee the smooth local governance transition of the new and reelected officials on June 30, 2022.
Año said all LGU assets, records and documents, among others, must be turned over transparently and efficiently to the new set of elected local officials “for the seamless continuance of ongoing programs for the people.”
“Public service must not be hampered amid a possible transition of leadership in the LGUs. We remind our local chief executives (LCEs) that as early as now [to form their] LGTT to guarantee the continuity of public service and ensure that all assets are well accounted for upon the transition,” Año said in a press statement.
The local chief executive (mayor or governor) will chair the LGTT, said Año.
Members of the LGTT include LGU department heads, DILG representatives, and the secretary of the local Sanggunian.
Año said there should also be one representative from a civil society organization or people’s organization in the LGTT.
The vice chairman of the transition team will be elected among the members.
In the memorandum circular, Año said LGTT must conduct an inventory of LGU properties including immovable properties such as land, buildings, infrastructure facilities and their improvements, and pieces of machinery made immovable as well as movable properties such as vehicles, office equipment, furniture, fixtures, and office supply stocks.
The transition team must also gather, secure, and preserve all official documents and/or records of LGU official transactions; and, turnover accountabilities using the prescribed forms, in case of a new set of incoming elected officials, and update the list of accountabilities, in case of re-elected officials.
Among the official documents the LGTTs must secure are the 2021 Governance Assessment Report; Contracts and Loans Agreement; Comprehensive Development Plan; 2022 Annual Investment Program; Comprehensive Land Use Plan; Public Service Continuity Plan; LGU’s Citizens Charter; and, various Full Disclosure Policy documents.
“Along with the other LGU documents, the LGTTs are expected to ensure that the all-important LGU Devolution Transition Plan, in line with the implementation of the Mandanas-Garcia Supreme Court ruling and Executive Order No. 138, will be forwarded to the new set of local officials,” Año said.
An LGTT must likewise organize a turnover ceremony for the incoming local officials, to include a briefing on the Governance Assessment Report and key challenges, to be conducted on June 30, 2022; and, ensure the accomplishment of the Elective Local Official Personal Data Sheet by the incoming officials to be submitted not later than July 11, 2022 to their Human Resources Management Office, Office of the Sanggunian, and to the DILG Field Office.
This is meant for an effective turnover of responsibilities ahead of the May 9, 2022 local and national elections.
DILG Secretary Eduardo M. Año has issued DILG Memorandum Circular No. 2022-029 instructing LGTT to ensure the safekeeping of local government unit (LGU) records and documents and the protection of LGU assets during the election period, and guarantee the smooth local governance transition of the new and reelected officials on June 30, 2022.
Año said all LGU assets, records and documents, among others, must be turned over transparently and efficiently to the new set of elected local officials “for the seamless continuance of ongoing programs for the people.”
“Public service must not be hampered amid a possible transition of leadership in the LGUs. We remind our local chief executives (LCEs) that as early as now [to form their] LGTT to guarantee the continuity of public service and ensure that all assets are well accounted for upon the transition,” Año said in a press statement.
The local chief executive (mayor or governor) will chair the LGTT, said Año.
Members of the LGTT include LGU department heads, DILG representatives, and the secretary of the local Sanggunian.
Año said there should also be one representative from a civil society organization or people’s organization in the LGTT.
The vice chairman of the transition team will be elected among the members.
In the memorandum circular, Año said LGTT must conduct an inventory of LGU properties including immovable properties such as land, buildings, infrastructure facilities and their improvements, and pieces of machinery made immovable as well as movable properties such as vehicles, office equipment, furniture, fixtures, and office supply stocks.
The transition team must also gather, secure, and preserve all official documents and/or records of LGU official transactions; and, turnover accountabilities using the prescribed forms, in case of a new set of incoming elected officials, and update the list of accountabilities, in case of re-elected officials.
Among the official documents the LGTTs must secure are the 2021 Governance Assessment Report; Contracts and Loans Agreement; Comprehensive Development Plan; 2022 Annual Investment Program; Comprehensive Land Use Plan; Public Service Continuity Plan; LGU’s Citizens Charter; and, various Full Disclosure Policy documents.
“Along with the other LGU documents, the LGTTs are expected to ensure that the all-important LGU Devolution Transition Plan, in line with the implementation of the Mandanas-Garcia Supreme Court ruling and Executive Order No. 138, will be forwarded to the new set of local officials,” Año said.
An LGTT must likewise organize a turnover ceremony for the incoming local officials, to include a briefing on the Governance Assessment Report and key challenges, to be conducted on June 30, 2022; and, ensure the accomplishment of the Elective Local Official Personal Data Sheet by the incoming officials to be submitted not later than July 11, 2022 to their Human Resources Management Office, Office of the Sanggunian, and to the DILG Field Office.
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