GOVERNMENT should look at providing targeted subsidies to small, small and medium enterprises (MSMEs) and the middle class, says an analyst, adding that more oil savings are needed if the Middle East crisis continues for a long time.
The Founding Chairman of the Asian Consulting Group and Senior Tax Consultant Raymond A. Abrea said the move to stop the fuel excise tax should be the last resort to deal with rising pump prices.
“The suspension of taxes, especially when the value-added tax (VAT) is calculated, is not an effective and quick solution to reduce the impact of price increases,” he said at the Pandesal Forum in Quezon City on Monday.
“What we support is a better, transparent, and digital issuance of targeted subsidies because if the tax is suspended and VAT is included, the rich and big companies will benefit the most,” he added.
He said that about 50-70% of diesel consumption is accounted for by the top 10-20% income earners or families.
This measure unfairly benefits the wealthy, “since instead of the government collecting money from them, as they can afford it, (they will be effectively exempted in the event of a) being suspended from work.”
“We are really fighting for more targeted and transparent subsidies, even for MSMEs and our middle class, or tax relief,” he added. “But the suspension (of customs duties) should be a last resort and should be limited.”
He said that during times of crisis, the government only provides subsidies and tax exemptions to the most vulnerable sections of society.
“What we forget is that those who work and pay taxes do not receive tax assistance or assistance because (the belief is) they cannot afford it because they earn money,” he said.
“We should have help or tax relief for MSMEs who are really struggling to make ends meet and workers who are not getting help,” he added.
ACG is pushing for the establishment of mandatory subsidies and tax exemptions for MSMEs and the middle class during the crisis.
He said if the price increase continues, the government can stop the fuel tax but not the VAT.
“But it should be temporary. It cannot be extended because more than P100 billion (collections) will be lost.”
“If you also stop VAT, the loss of revenue will exceed P200 billion. And where will the government get that thing?” he added.
He said the long-term suspension of both taxes will force the government to borrow again.
“There should be clear economic indicators so that there is no need for emergency power because it is a waste of time. A few kilos (Immediate action is needed),” he added.
When asked how long the government should suspend him, he said: “I am with the Ministry of Finance when I say that we really have to consider and consider all aspects if this escalates… our answer should depend on the situation,” he said.
“I think it is reckless to just stop for a month or three months without knowing how long this problem will last,” he added.
The ACG estimates that subsidies targeted at vulnerable sections of the public, such as commuters, public utility vehicle operators, and the agricultural industry – will cost the government P3.5-5 billion.
Mr. Abrea added that the government should prioritize investing in oil reserves.
“At the moment, we must be very smart and strategic. What the government should do first is to seek to provide goods,” he said.
“If (the war) escalates, the supply will be a problem. I hope that the intervention of our international partners (to ensure) safe passage through the Strait of Hormuz will ensure the supply,” he added.
He said price control measures would be useless if there was no supply. – Justine Irish D. Tabile
