Duterte approves proposal to proceed with fuel tax hike in 2019

President Rodrigo Duterte has heeded his economic managers' advice to proceed with the imposition of the second round of increases in the excise taxes of petroleum products in 2019.

Duterte approved the proposal during the Cabinet meeting in Malacañang on Tuesday, Budget Secretary Benjamin Diokno said.

“The President and the Cabinet approved the implementation of the law," Diokno told GMA News Online.

"Yes. Here's the argument: The sharp turnaround in world crude oil prices from a peak of $80 per barrel to $68 per barrel on November 29, with Dubai Futures prices projecting further decline below $60 per barrel in 2019," Diokno said.

"At its peak, diesel price was P48.80 per liter, it will be P37.76 [per liter] in January 2019, inclusive of the P2 excise tax. For gasoline (95 octane) it was P60.90 at its peak, it will be 50.82 in January 2019, inclusive of the P2 additional excise tax," he added.

Malacañang confirmed that Duterte approved the economic team's recommendation.

“Due consideration was given to several factors including, but not limited to: the downward impact on inflation owing to the steep drop in the Dubai crude oil price, the disruption in the Build Build Build infrastructure program, and reduction in budgets including personal services of national government agencies should excise tax on fuel be suspended,” presidential spokesperson Salvador Panelo said in a statement.

On November 29, the economic managers took back their earlier recommendation to suspend the second tranche of fuel excise tax increase under the Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) law.  

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.

"He [Duterte] is simply implementing the TRAIN law," Diokno said.

"Even with the second tranche, oil product prices will be P10 lower than their peak sometime in October," he said.

Panelo said that due to current oil prices, the legal requirement for the suspension of excise tax on fuel cannot be met.

“While the oil excise tax increase is a negligible contributor to inflation, we still commit to provide financial assistance to the 50 percent poorest households,” he said. — with Virgil Lopez/NB/BM, GMA News