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Fuel marking programme and vaccine rollout essential for ailing Philippine economy

The Philippines recently announced that it is expanding the country’s programme to infuse taxes-paid fuel with chemical markers in order to curb oil smuggling and tax evasion—an unsurprising move since the scheme has been highly successful. Manila has already collected more than 236 billion pesos in duties from the scheme since its launch in September 2019. A good portion of that revenue might otherwise have been lost, since before the fuel programme was put into place, the Asian Development Bank (ADB) estimated that revenue losses from the Philippines’ domestic petroleum black market exceeded 37.5 billion pesos annually.

The fact that the Philippines is doubling down on the programme’s success is fantastic news that couldn’t have come at a better time. As the Finance Secretary Carlos Dominguez noted when announcing the expansion of the fuel marking scheme, “having gone through the ravages of a pandemic and funding our nation’s economic recovery, the government needs all the revenue it can muster.”

Under the chemical markers programme, all petroleum products that are refined, manufactured or imported into the Philippines and subject to duties and taxes are dosed with a unique biochemical marker in trace quantities, provided by SGS Philippines and Swiss security experts SICPA. This is done at depots before distribution to market, and provides a means of secure, tamper-proof identification— much like a fingerprint. Unmarked fuel can be detected using specialised equipment, thereby providing authorities with evidence that a product has fraudulently bypassed payment of taxes and duties owed.

According to Dominguez, the Philippines infused fuel markers into 16.43 billion litres of oil between September 2019 and December 2020, having already reached its target of infusing 100 percent of the total fuel inventory nationwide. A new agreement between the Department of Energy (DOE) and Bureaus of Internal Revenue (BIR) and Customs promises to be a watershed moment both in terms of domestic revenue collection and the country’s broader battle against the COVID-19 pandemic.

“Properly collecting all taxes due from the oil industry is indispensable to [the battle against COVID],” Dominguez explained during the virtual signing ceremony. “This will help us surmount the global health emergency and bring the country back to the path of inclusive growth. A better future for our people depends on this.”

Indeed, the fuel marking programme may prove to be more important than ever on the back of recent analysis showing that the Philippine economy is likely to miss its already-lowered economic growth target. In fact, the Philippine economy shrank by 4.2% in the first quarter of 2021, while China, Taiwan, South Korea and Vietnam have already returned to previous output levels. To make matters worse, the Philippines’ fresh contraction comes on the back of a dismal 2020 in which the country’s economy dwindled by 9.6%, the Philippines’ worst performance on record.

At the same time, Philippine authorities are fighting an uphill battle against COVID-19 which is compounding the country’s economic woes. Daily cases in April, for example, increased by more than 15,000 at one point, and daily infections are only now beginning to ease.

The impact of COVID-19 on local communities in the Philippines has been devastating. According to the Philippines Economic Update (PEU) released by the World Bank this week, poor families have unsurprisingly been hardest hit by the pandemic, with the health and schooling of their children diving to catastrophic levels. Two out of five Philippines households report being worried about not having enough food for the coming days, and three of five cite a lack of income as reason for not obtaining desperately needed medical treatment. This year’s third wave has only put economic recovery further out of reach.

Other than taking every possible opportunity to line the public coffers through successful programmes like the fuel marking scheme, the single biggest thing the Philippines can do to hasten its economic recovery is to ramp up its COVID-19 vaccine campaign. Authorities approved the use of the Sinopharm vaccine earlier this week, and has expanded the approval already given to the Pfizer/BioNTech vaccine to include ages 12 to 15. So far, some 6 million people—out of a total population of over 108 million— have been inoculated, of which 1.5 million have received their second dose.

While health authorities say vaccination is vital to ending the devastating cycle of lockdowns which has cramped the Philippine economy, vaccination take-up in the Philippines remains dangerously low. According to a Social Weather Stations (SWS) survey of 1,200 people last month, close to 70% of respondents expressed being uncertain or even unwilling to get the vaccine. In stark contrast, a Gallup survey of 116 countries and areas found that only 32% expressed vaccine hesitancy globally.

Vaccine hesitancy in the Philippines remains a major issue following the country’s previous efforts to inoculate against dengue fever. In 2017, a large-scale vaccination drive was suspended after French drugmaker Sanofi Pasteur found that its dengue vaccine, Dengvaxia, could have unintended consequences for some patients. By the time the rollout was halted, more than 730,000 Filipinos had received the Dengvaxia jab; national reluctance to take the COVID-19 vaccine could thwart any hopes of ever reaching herd immunity.

Cracking down on tax fraud is an essential step in the right direction for the Philippines’ fight against COVID-19. If domestic resources can then be directed toward the national vaccine drive, a post-COVID Philippines could be closer than expected.

This article does not necessarily reflect the opinions of the editors or the management of EconoTimes

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