Recto: TRAIN contains 'self-executory' fuel tax-freeze provision

MANILA, Philippines — Amid calls to suspend the implementation of the excise tax on fuel under the tax reform law, Senate President Pro Tempore Ralph Recto said on Thursday that the statute had a “self-executory” tax-freeze provision in the event of high prices of oil.

According to Recto, the tax-freeze provision of the Tax Reform for Acceleration and Inclusion Law would kick in when the benchmark price of crude oil reached $80 per barrel.

Recto said that the TRAIN provided for a “price-triggered collection moratorium” which was reiterated by the Bureau of Internal Revenue Revenue Regulations 2-2018, the law’s implementing rules and regulations on petroleum products.

“The tripwire is USD80 per barrel, based on Dubai crude as reflected in MOPS,” Recto said.

“This is the circuit breaker in TRAIN. When oil touches this price, the excise tax increase on gas is suspended,” he added.

He also rejected the argument by officials from the Department of Finance that for this to take effect the agency must first issue a separate IRR.

Recto stressed that the language of the law was clear and it must be self-executory and automatically implemented.

“The halt in the collection of petrol taxes should be as fast as our collection under TRAIN when oil prices soar,” he said.

On Wednesday, Sen. Paolo Benigno “Bam” Aquino urged his colleagues in Congress to amend the TRAIN law to put in place more safeguards in the statute amid concerns over climbing inflation.

Aquino said that the suggestion from the Palace that the excise tax on fuel could be suspended in 2019 was “too little, too late.”

The Liberal Party senator is urging the passage of an inflation-based suspension of the TRAIN Law’s excise tax provision.

Under his proposal, the collection of additional petrol taxes would be suspended if inflation for the past three months exceeded official estimates.

Recto cited Section 5 of RR 2-2018 which provided for the suspension of excise taxes on fuel if the average Dubai crude oil on the Mean of Platts Singapore for the past three months reached or exceeded $80 per barrel.

Sen. Grace Poe meanwhile wants to provide another layer of social protection for poor families amid the spike in the prices of goods and services that may have been partly caused by the TRAIN Law amid reports that the government has failed to provide cash transfers to many of its 10 million household target.

“We should think of ways to lighten the burden of our countrymen especially in the province due to the increase in the price of electricity, water and goods and the possible fare hike,” she said in Filipino.

Poe’s Senate Committee on Public Services is scheduled to conduct a meeting in Iloilo City on Friday to ascertain the possible “domino effect” of the TRAIN Law.

Recto said that compounding the problem of inflation was the depreciation of the value of the peso and the soaring prices of petrol.

Just this week, the peso fell to its lowest value in 11 years, closing at 52.465 to a dollar.

The TRAIN Law kicked into effect on Jan. 1, 2018 and was sold by the government as an important revenue source for its ambitious infrastructure and social services programs.

It has been blamed for the increase in inflation in the past months, with inflation rate for April settling at 4.5 percent, the highest in five years. This pushed the year-to-date inflation to 4.1 percent which was already above the 2 to 4 percent target of the Banko Sentral ng Pilipinas.