Fuel excise tax hike still scheduled in 2020

MANILA, Philippines — Even with plans to suspend the second tranche of fuel excise tax hike next year, the Department of Finance (DOF) is not delaying its full implementation by 2020 as provided for in the tax reform law.

In an interview, Finance Undersecretary Karl Kendrick Chua said the government will impose the full P6 per liter excise tax on fuel even if the second tranche of increase gets deferred next year, so long as the prices of Dubai crude oil based on the Mean of Platts Singapore (MOPS) do not reach $80 per barrel before 2020.         

“First of all, a suspension is temporary and there is already the law that provides the scheduled increase. So if you suspend for one year, by 2020 you have to apply the full amount. If you suspend, after one year you have to apply the next increase if the prices do not go above $80,” Chua said.

The Tax Reform for Acceleration and Inclusion (TRAIN) law has increased the excise tax on fuel by P2.50 per liter effective Jan. 1, 2018, P2 per liter on Jan. 1 next year and P1.50 per liter by 2020.

By Jan. 1, 2020, the excise tax on fuel would increase by P3.50 per liter, for a total of P6 per liter.

The government’s economic team has recommended the suspension of the increase scheduled in 2019 to anchor the public’s inflation expectation.

Under TRAIN, the suspension is possible if the price of Dubai crude averages at least $80 per barrel – based on MOPS – in three months preceding the next scheduled increase.

But Chua said the government is still working out the implementing rules and regulations to determine the conditions for the reinstatement of the suspended hike.

“The resumption is not stated in the law – that’s what the IRR will clarify when it will be resumed,” Chua said.

He added that the IRR will come in the form of a Bureau of Internal Revenue regulation.

For his part, Finance Assistance Secretary Antonio Lambino said the IRR “is in its advanced stage” and will definitely be released within the year.

According to Chua, the government is considering two options for the resumption of the excise tax hike – to wait for one year before the suspension gets lifted; or to impose a rule providing for reinstatement once Dubai crude oil averages below $80 per barrel for three months.

“That is what is being discussed as we prepare the IRR – how to interpret that in the law. Do you wait for one year or do you apply the three month rule, which is also sensible?” the official said.