‘Savings from VAT exemption on meds to be wiped out by fuel excise tax hike’

MANILA – The savings to be gained from the value-added tax exemption on medicines for diabetes, hypertension and high cholesterol may easily be wiped out by the implementation of the second tranche of additional fuel excise tax in January, Bayan Muna party-list said on Sunday.

“Just like how last year’s cuts in personal income taxes were wiped out by higher prices due to increased taxes on oil, sugary drinks and other goods and services, so too might the benefit of the tax cut on maintenance meds be made insignificant by the next round of excise tax hikes on oil and petroleum products,” Bayan Muna chair Neri Colmenares said in a statement.

Starting Jan. 1, 2019, medicines for diabetes, high cholesterol, and hypertension will be cheaper as a provision in the Tax Reform for Acceleration and Inclusion (TRAIN) Law exempting such drugs from the value added tax will take effect.

But it is also on this same day that the second tranche of additional excise tax for fuel products would be implemented.

Under this provision, excise tax on diesel and gasoline are set to increase from its current levels by P2 per liter, and P1 per liter for LPG and kerosene.

The second tranche of increase in the excise tax on fuel products was supposed to be temporarily suspended to alleviate the effects of rising prices of oil.

But the government’s economic managers, which includes the Department of Finance (DOF) eventually took it back following the decreasing crude prices in the world market and the pump price rollbacks.

With additional excise taxes negating the purpose of exempting value added tax on medicines, Colmenares urged the government to push through with its original plan to suspend the second round of fuel tax hikes.

“The decision of the DOF to push through with the second tranche of the oil excise tax increase this January will surely jack up prices anew, given the multiplier effect of oil prices on power, transportation and other basic goods and utilities,” he said.

“The DOF is making the same mistake as it did when it said the first tranche would have a minimal impact on inflation. This year the country reached its highest inflation rate in nine years,” he added.

For his part, Bayan Muna party-list representative Carlos Zarate said that with additional fuel excise taxes taking effect in January, the Duterte administration is once again “gambling” with prices of goods and would hit consumers with price shocks.

“When oil prices in the international market begins to increase due to heightened demand and reduced production then oil prices in the country would again jack up,” he said.

“Let me also remind the administration that this would hit during the election period and voters would also hit back by junking the administration bets,” he added.

Finance assistant secretary Tony Lambino, however, said consumers would not feel the effect of the additional fuel excise taxes right away due to stable supply and decreasing oil import price.

Both Colmenares and Zarate have a pending petition before the Supreme Court questioning the legality and constitutionality of the TRAIN Law. (GMA News)

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