Fuel excise tax may be suspended

MANILA, Philippines — As fuel prices soar, Malacañang expressed openness yesterday to the suspension of hefty excise taxes on diesel, liquefied petroleum gas (LPG), kerosene and bunker fuel that is used to produce electricity.

Magdalo party-list Rep. Gary Alejano said that under the Tax Reform for Acceleration and Inclusion (TRAIN) law, the tax on these products must be suspended when the price of crude oil in the world market reaches $80 per barrel.

Malacañang agreed, with presidential spokesman Harry Roque saying, “We’re ready, if it reaches that price, to suspend the collection of excise taxes on oil products.”

He said the departments of finance and budget would be consulted before any suspension, particularly on its impact on certain social services.

“The price of crude oil is reaching a multi-year high of $80. Brent crude is already at $79.35 per barrel, while Dubai crude is at $74.45,” Alejano said yesterday.

Brent crude is extracted in Europe while Dubai crude is produced in the Middle East. Brent is lighter than Dubai. The two are usually used as price benchmarks.

“The movement of crude oil prices in the world market is alarming and should be monitored closely, given also the political crisis in the Middle East right now. Being a net oil importer, the Philippines is taking a huge hit from increases in crude oil prices, which are further worsened by the new petroleum excise taxes under TRAIN law,” Alejano said. 

Since the law’s implementation in January this year, he said the total price increase as of last Monday has been P8.07 per liter for gasoline, P8.95 for diesel and P9.15 per liter of kerosene.  

He said people are already reeling from increases in the cost of diesel and other oil products and their domino effect on prices of products and services.

Administration officials have admitted that the monthly increases in consumer prices since January were largely due to oil taxes imposed under TRAIN.

TRAIN levied a total of P6 tax on diesel, cooking gas, kerosene and bunker fuel. The levy was spread over three years up to 2020.

This year’s first installment of the tax varies on the product. In the case of diesel, it was P2.50 per liter. On cooking gas, it was P1. The remainder of the P6 would be collected next year and 2020.

On top of the excise tax, the law imposes the 12-percent value added tax based on the new levy. Thus, in January, the total increase in the retail price of diesel was almost P3 per liter.

Alejano and his opposition colleagues are calling on the House of Representatives to review the law and to suspend it in the meantime, while the Makabayan bloc of seven leftist party-list representatives wants it repealed.

Quirino Rep. Dakila Cua, who chairs the committee on ways and means, said he was open to reviewing TRAIN but not to suspending it.

“If you suspend it, that would affect the national coffers. That is not a responsible thing to do,” he said.

Administration officials have starting shooting down the review and repeal proposals in both the House and the Senate.

In the Senate, there is a similar review initiative started by Sen. Paolo Benigno Aquino IV. 

According to the Bureau of Internal Revenue, taxes on oil products imposed under TRAIN brought in an additional P4.73 billion in the first three months of this year.        

Militant groups yesterday launched a signature drive against the implementation of the TRAIN.

Representatives from Bagong Alyansang Makabayan (Bayan), Bayan Muna and other cause-oriented groups sought the signatures of hundreds of commuters queuing at the MRT-North Avenue station in Quezon City.

Bayan secretary-general Renato Reyes and Teodoro Casiño of Bayan Muna hope to gather enough support for their campaign against the

TRAIN Law before Congress goes on break on June 1.

The groups have yet to set the number of signatures they hope to attain, which Reyes is hoping will convince lawmakers to tackle urgent

bills seeking to repeal or suspend the tax measure.

“We hope to submit the signatures we have gathered to Congress next week,” said Reyes in a statement.

He urged Congress to scrap the tax reform law, which he said has become a burden for ordinary Filipinos.

Price monitoring

Socioeconomic Planning Secretary Ernesto Pernia called for stronger price monitoring of goods and strict enforcement of sanctions against erring businessmen found to be unjustly raising prices amid the implementation of the TRAIN Law.

During yesterday’s first congressional hearing on the second package of the tax reform program, which deals with the rationalization of incentives for businesses, Pernia acknowledged that the steep rise in inflation in the first four months of the year is in part because of the imposition of higher excise taxes under TRAIN.

But at the same time, he pointed put that it is also a natural occurrence in a rapidly growing economy and increase in demand following higher disposable incomes from the reduction in personal income tax.

Another factor for the rapid increase in prices is profiteering by businesses, such as those who sell old stocks at much higher prices, he said.

“There’s also some fraction that can be attributed to profiteering because TRAIN 1 has become a convenient whipping boy, a convenient alibi for those who want to take advantage of the situation to increase prices, even if it is not really warranted,” he said during the hearing of the House ways and means committee on TRAIN 2.

Pernia said there is a need to strengthen the price monitoring activities of the Department of Trade and Industry (DTI) and to strongly enforce sanctions on those found hiking prices without cause.

“Price monitoring is DTI’s job with corresponding sanctions,” he said when sought for comment.

Prices of goods and services in the country rose at a faster pace of 4.5 percent in April from 4.3 percent in March and 3.2 percent in April 2017. Out of the April rate, 0.5 to 0.7 percentage points can be attributed to TRAIN.

Finance Secretary Carlos Dominguez III also said TRAIN has been “unfairly blamed” for the elevated inflation rate as rising prices of imported commodities also come into play.

“By our estimates, fully two-thirds of last April’s 4.5 percent inflation rate is typical of a rapidly expanding economy. The remaining is due mainly to the sharp increases in key imported commodities specifically oil, the realignment of currency exchange rates and a robust increase in domestic demand,” he said.

“At any rate, the inflationary impact of TRAIN is expected to diminish over the next few months,” he added.

Dominguez said the government is already implementing the unconditional cash transfer program to cushion the effects of elevated inflation on the poorest households.

During a House ways and means committee hearing, Dominguez told lawmakers the first package of the TRAIN law “continues the process of fiscal consolidation that won us a succession of credit rating upgrades.”

“With everyone’s continued support of the Comprehensive Tax Reform Program, we expect to be upgraded once more in the upcoming rating periods,” he added.

Finance Undersecretary Karl Kendrick Chua, for his part, said pursuing the administration’s tax reform program is necessary to maintain the stable and positive outlook assigned by credit rating agencies to the Philippine government.

To recall, credit watcher S&P Global Ratings last month raised its credit outlook for the Philippines to positive from stable, raising the possibility of a rating upgrade for the country on the back of solid economic growth, healthy external position and improvements in policy-making.

Among the factors cited by the S&P was the TRAIN law, which it said would ensure that finances would remain sustainable while addressing the nation’s infrastructure needs and chronic underinvestment.  With Emmanuel Tupas, Czeriza Valencia, Mary Grace Padin