Duterte’s econ managers take back advice to suspend tax hike on oil products

President Rodrigo Duterte’s economic managers have taken back their earlier recommendation to suspend the implementation of the second round of increases in the excise taxes of petroleum products scheduled next year.

Finance Secretary Carlos Dominguez made the announcement in light of the decreasing crude prices in the world market and the pump price rollbacks over the past few weeks.

“The Development Budget Coordination Committee (DBCC), in a special meeting, has decided to recommend the continued implementation of the second tranche of excise taxes in petroleum products under Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) law,” Dominguez said at a press conference in Manila.

The Finance chief said the economic managers' decision to continue the implementation of the second round of fuel excise tax increase "comes in light of the favorable outlook in world oil prices."

"The Dubai crude oil prices have gone down by 14 percent from an average of $79 per barrel in October down to $68 per barrel so far in November," Dominguez said.

"More so, the oil futures market projects the price of oil to decline further to below $60 per barrel in 2019, indicating a downward trend in world oil prices," he said.

TRAIN

The TRAIN law imposed a P2.50 per liter excise tax on diesel from zero and hiked the levy on gasoline to P7.00 per liter.

The law also provides that starting 2019, excise taxes for diesel will be hiked by a total of P4.50 and those of gasoline by P9.00 under the second tranche.

The increase, however, could be temporarily suspended should the average price of Dubai crude reach or exceed an average of $80 per barrel for three months prior to the implementation of the next round of excise tax hikes.

The latest announcement from the economic team came only two weeks after Malacañang approved the economic managers’ earlier recommendation to suspend the second round of increases, which had been scheduled to go into effect in January 2019.

The Finance chief explained that the situation was different when the economic managers made the recommendation to suspend the fuel excise tax hike in October as the price of crude was hitting $80 per barrel at the time.

"The DBCC also took into consideration the adverse impact on revenues and expenditures for fiscal year 2019 should the government proceed with the suspension of the scheduled increase of excise taxes on petroleum," Dominguez said. 

"The said measure is estimated to result to a net revenue loss of P43.4 billion for a 12-month suspension, assuming Dubai crude oil prices average $65 per barrel in 2019," he said.

The "erosion" in revenue will lead to a "commensurate" decrease in government expenditures so as not to breach the target deficit level of 3.2% of gross domestic product (GDP) in 2019.

The Cabinet official said that the DBCC deems the suspension unnecessary as the month-on-month inflation is moderating due to supply-side reforms initiated by the government coupled with falling petroleum prices in the world market.

Nevertheless, the recommendation to continue the scheduled increase of excise taxes on petroleum products will be further discussed in the Cabinet meeting on Tuesday, December 4 and subject to the approval of President Rodrigo Duterte.

Senators weigh in

Senator Joseph Victor Ejercito, one of the lawmakers who had pushed for the suspension of the second tranche, asked the DBCC not to reverse its decision.

He said the recommendation had been approved by Duterte after a meeting with some of the majority bloc senators "who appealed to him to ease the burden on our people."

Ejercito also said that the earlier oil price increases merely worsened the inflation rate, which was first and foremost caused by the first round of excise tax increases in January 2018.

“Ngayong nakakahinga na ng kaunti ang ating mga kababayan e papatawan na naman natin ng pagtaas ng buwis na tiyak na magpaptaas muli sa presyo ng mga pangunahing bilihin. Let us allow inflation to continue its downward trend so the situation stabilizes,” he said in a message to reporters.

“I urge the President and the DBCC not to walk back on their decision to lighten the load off the purchasing power of Filipino families. We have been asking our people to bite the bullet for the sake of the common good. I now urge government to bite the bullet for the sake of the welfare of the majority of the Filipinos,” he added.

Senator Joel Villanueva, on the other hand, has a different take on the matter.

He said he has filed Senate Bill 2104, which identifies three requirements to determine whether the excise tax increase should be suspended or not.

“If we do not suffer significant food inflation, or [if] inflation is within government targets as guaranteed by the government’s economic managers and/or price of oil continues to go down, then I don’t have any problem implementing the second round of fuel excise tax in 2019,” he said in a text message to GMA News Online.

Administration ally Senator Aquilino Pimentel III said the priority of the economic managers is bringing down the inflation rate.

“Inflation is a dangerous phenomenon which should be slain on sight when it rears its ugly head. Hence, our economic managers should make up their minds on whether to fight inflation or pursue revenues. I suggest we fight inflation NOW,” he said in a separate text message to GMA News Online.

Senator Paolo Benigno Aquino III, however, urged the President not to take back his earlier promise.

“Huwag naman sana silang paasa. Doble ang sakit pag atras-abante ang administrasyon sa kanilang mga pangako,” he said.

“Sana huwag na bawiin ng Pangulo ang suspensyon at hindi na rin gatungan ang buwis sa petrolyo. Ang hiling dapat ng taumbayan, hindi ng DBM, ang dinggin ng Malacañang, lalo na ngayong Kapaskuhan,” he added. — with Amita Legaspi/NB/BM, GMA News