Budget Secretary Benjamin E. Diokno confirmed that President Duterte approved the next round of increasing taxes for fuelwhich will be taking effect on 2019. The said suggestion is taken from the Duterte’s economic team.
“The president is only implementing what is stated to the Tax Reform for Acceleration and Inclusion (TRAIN) law,” Dikono said.
“The tremendous increased of the global oil prices was deemed to be the reason to influence the president decision,” Diokno added.
According to the report of Diokno, “from a peak of close to $80 per barrel to $68 per barrel on November 29, with Dubai Futures prices projecting further decline below $60 per barrel in 2019. At its peak, diesel price was P49.80 per liter, it will be P37.76 on January 19, inclusive of the P2 peso excise tax. For gasoline [95 octane] it was P60.90 at its peak, it will be 50.82 on January 19 inclusive of P2 additional excise tax.”
Reactions from the different departments of the government
However, a reassessment was made by the Budget Coordination Committee (DBCC) due to the declining prices of world oil. Respectively, the Cabinet concerned to the retraction by the DBCC. But the secretary of Department of Energy (DOE), Alfonso G. Cusi recommended proceeding with the implementation of the second tranche in January.
“We have submitted our position already alongside the forecast. The excise tax will proceed because the country will really need to build infrastructure so we need the funds,” said the DOE secretary.
Suspending the implementation of the second tranche in 2019 will impair the revenue gap of Php41 million for the Build Build Build program.
The Cabinet also identified the concerns of the senators which proceeding with the second-round hikes purely on the basis of lower global prices was short-sighted; and alarm by consumer and labor groups that spikes in prices of basic goods would follow the second fuel tax hike of P2 a liter, under the TRAIN law.
Dubai crude oil to be at around the low $50s in the coming months influenced the Department of Finance , and Department of Budget and Management to reinstated the second tranche of increasing the excise tax on fuel.
Senators’ concerns and recommendations
Withdrawing the decision of the DBCC due to the declining world oil prices, was just shortsighted.
From the report of Nicolas and Lectura of the BusinessMirror, “for 2019 the scheduled increase in fuel excise tax is P2 per liter, according to the TRAIN law. It called for an excise tax of P2.50 per liter on diesel, with an additional P2 to be imposed next year and P1.50 per liter in 2020. This brings the excise tax on diesel to P4.50 per liter in 2019, and P6 per liter in 2020.”
“From the previous P4.35 per liter, the excise tax on gasoline was increased to P7 this year, with an additional P2 increase in 2019, and P1 in 2020. For 2019 and 2020, the rates will be at P9 per liter and P10 per liter, respectively.”
What you should know
Under the TRAIN law, the excise tax increase may be suspended if the international price of Dubai crude breaches the $80-per-barrel threshold for three months. The law was silent on the mechanism for lifting the suspension.
DBCC forecast that crude oil may have an average of $65 per barrel next year if the price continuously to drop. Recently a 16 percent reduction was noted from $79 per barrel to $68.
Finance Secretary Carlos G. Dominguez III said they considered the impact of the suspension on the revenue and expenditures program for next year. A suspension of the second tranche in 2019 will generate a loss of Php43.4 billion. Thus, the government need to cut its expenditure just to ensure that the programmed deficit level of 3.2 percent of GDP for 2019 is not breached.