Fuel tax suspension seen in January 2019

MANILA, Philippines — New and higher taxes on diesel and other oil products will most likely be suspended in January next year, Albay Rep. Joey Salceda said yesterday.

Under the controversial Tax Reform for Acceleration and Inclusion (TRAIN) law, Salceda said that taxes for next year would be suspended if the price of world crude averages at least $80 per barrel for three months.

He said based on contracted deliveries for this month, November and December, crude would remain above $80 per barrel.

“That means that the increase in taxes for 2019 will be automatically suspended,” he said in an interview.

President Duterte had earlier voiced his openness to calls for the suspension of excise tax on oil to arrest the runaway inflation.

But Finance Assistant Secretary Tony Lambino said they want some guidance on the pronouncement of the President as he might be referring to the next tranche of increase in the excise taxes on oil.

“As far as I could tell, I interpreted the statement as being the next increase which is P2, the 2019 increase in the excise. And actually, there already is suspension mechanism in place in the TRAIN law for that to happen,” Lambino said at a press briefing yesterday in Malacañang.

Energy Secretary Alfonso Cusi, for his part, said they are “preparing a formal memo to the Office of the President to seek the suspension of the collection of excise taxes on petroleum products.”

In a statement, the Department of Energy said “current global situation” is largely to blame for surging fuel prices. It also said that “global oil prices also tend to go up in the winter months (October-March), as demand for heating is at its highest.”

The TRAIN law imposed a new tax of P7 per liter or kilogram on diesel, cooking gas, kerosene and bunker oil for electricity generation, and higher taxes on other petroleum products like gasoline. The levies were to be spread over three years starting this year. Next year’s adjustment will range from P1 to P2.

Lambino stressed legislative action is needed to implement an immediate suspension of excise taxes.

“The excise tax rates are provided in the law. So if we suspend based on the mechanism that is in the TRAIN Law, then that can be automatic. But if we do something else, it would require different actions,” the finance official said.

Lambino said inflation, which hit a record-high 6.7 percent in September, would remain high even if the excise taxes are suspended.

“I think we also need to manage the expectations in the sense that if Congress decides to create a new suspension mechanism, the prices of oil would not go down that much because the import price has risen from about $40 per barrel to above $80 per barrel. The import price is something unfortunately we do not control because we are not an oil producer. We are a price-taker,” Lambino said.

TRAIN not the only answer

He claimed that without the TRAIN law, inflation would still be at six percent to 6.3 percent instead of 6.7 percent. He said the excises taxes on fuel only constitute 25 percent of the increase in fuel prices.

“The 75 percent will be there whether there is TRAIN or not. The inflation will remain high,” he said.

“If you look at the food versus non-food analysis, food is accelerating while non-food is decelerating in terms of the inflation rate. So that’s why the economic development cluster prioritized immediate actions to bring down the prices of food by increasing supply,” he said.

Lambino said the government would not be able to collect P40 billion in 2019 if the next tranche of increase in fuel excise taxes is suspended.

Starting January 2019, the TRAIN law will impose higher excise tax on gasoline from P4.35 per liter to P7 per liter, P2.50 per liter for diesel, P3 per liter for kerosene and P1 per kilogram on liquefied petroleum gas (LPG).

In 2020, tax on gasoline will increase to P9 per liter, diesel to P4.50 per liter, kerosene to P4 per liter and LPG to P2 per kilogram.

On Tuesday, Duterte asked Finance Secretary Carlos Dominguez III to look into the proposal to suspend the fuel excise tax hike.

At the Senate, minority senators Paolo Benigno Aquino IV and Francis Pangilinan filed a joint resolution calling for the suspension of the excise tax hike on fuel and its rollback to pre-TRAIN law levels.

Joint Resolution 15 yesterday was taken up on first reading in the plenary and was referred to the Senate committee on ways and means.

The resolution seeks an urgent intervention of the Congress to mitigate the inflationary effects of rising fuel prices by suspending the increases.

The senators said that since December 2017, gasoline prices have increased by P10.50 per liter, diesel by P12 and kerosene by P14.12.

Citing Duterte’s statement that he is open to suspending the fuel tax hike, Aquino said the resolution they filed “will show what the Senate feels about this measure.”

He said a counterpart bill in the House would be filed by Marikina Rep. Romero Quimbo.

If adopted by both the Senate and the House, Aquino said the resolution would carry the force of law.

House Minority Leader Danilo Suarez also expressed support for scrapping of fuel taxes. – With Alexis Romero, Danessa Rivera, Marvin Sy, Ding Cervantes