Oil tax hike suspension looms

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MALACAÑANG and Congress have agreed on the need to suspend an oil tax hike set in January, a move one senior Finance official said is justified given current world crude price forecasts.

The development comes as headline inflation has lately been hitting multiyear peaks — largely on surging world crude prices — averaging five percent in the nine months to September against the central bank’s 2-4% target range for full-year 2018.

Next year will also be marked by mid-term elections in May.

Special Assistant to the President (SAP) Christopher T. Go said on Sunday that President Rodrigo R. Duterte and his Cabinet have discussed this issue, while majority of senators submitted an Oct. 9 letter to Mr. Duterte seeking such a move even before the “trigger period” set by Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion Act (TRAIN) that took effect last January.

“The President and the Executive department is now looking into the temporary suspension of the next increase of oil excise tax rates in 2019… This is scheduled to be imposed by January of next year as mandated by the TRAIN Law,” Mr. Go said in a speech on Sunday morning at the opening of the Department of Agriculture’s TienDA Malasakit Food Outlet in Taguig City.


That law increased fuel excise taxes by P2.5 per liter this year, and is scheduled to raise the levy by P2 and P1.5 per liter in 2019 and 2020, respectively, totaling a P6 excise tax hike.

The law suspends the hike automatically should average crude oil price, based on Dubai, reach $80 per barrel (/bbl) in these last three months. Price of Dubai crude — used as a benchmark for Asia — rose 43% to $77.02/bbl in September from $53.86/bbl a year ago and by 6.78% from August’s $72.23/bbl. Prices averaged $82.278/bbl in the 10 trading days to Oct. 12, 50.69% more than the $54.602/bbl in last year’s comparable period.

“But to arrest the rising price of oil and its effects on the inflation rate, we will defer implementing it until the right time,” Mr. Go said in his speech, even as he clarified in a statement later in the afternoon “pero ikonsidera rin natin kung ano ang nasa TRAIN law (we will consider what is provided by TRAIN).”

Sought for clarification, Finance Assistant Secretary and Spokesperson Antonio Joselito G. Lambino II said in a Viber message that “[a]s announced by SAP Bong Go, the President is making an early announcement of the temporary suspension of the January 2019 oil excise increase under the TRAIN Law”.

“Today’s price and multiple estimates of crude prices over the next two months show that the average price will stay above the $80 threshold, and it is therefore being announced early that the suspension mechanism will be activated,” Mr. Lambino explained.

“This announcement is being made two months before the time required by law, to proactively anchor inflation expectations and enhance the welfare of the Filipino people,” he added.

“After consulting the leadership of both the Senate and the House of Representatives, as well as the economic team, the President is confident that this course of action will help anchor inflation expectations for the coming year, allow the public to manage finances better, and disallow hoarders and profiteers from taking advantage of the situation.”

The Senate majority has sought Mr. Duterte’s support for Congress’ plans to suspend the scheduled increase in fuel excise tax come January.

“We, the undersigned senators who are supportive of your reform efforts, respectfully solicit your support in a move of both Houses of Congress to suspend any further increases in excise taxes on diesel, gasoline and other petroleum products for 2019 and 2020 as mandated by R.A. 10963, or the ‘Tax Reform for Acceleration and Inclusion’ Law,” the senators said in their Oct. 9 letter to the President.

The letter was signed by Senate President Vicente C. Sotto III, Senate Majority Leader Juan Miguel F. Zubiri, Senator Joseph Victor G. Ejercito on Sunday, Senate President Pro tempore Ralph G. Recto, as well as Senators Loren B. Legarda, Juan Edgardo M. Angara, Nancy S. Binay-Angeles, Francis G. Escudero, Sherwin T. Gatchalian, Richard J. Gordon, Gregorio B. Honasan II, Panfilo M. Lacson, Emmanuel D. Pacquiao, Aquilino L. Pimentel III, Grace S. Poe-Llamanzares, Joel J. Villanueva and Cynthia A. Villar.

“This was discussed with the President during our Monday meeting with him. SOF (Secretary of Finance Carlos G.) Dominguez (III) just asked us to formalize it with a letter as the President will consider the suspension of excise tax on fuel when he gets back from Bali. That letter was signed by all the members of the Majority,” Mr. Zubiri told reporters in a mobile phone message.

“That is the reason PRRD (President Rodrigo R. Duterte) decided to suspend excise tax,” Mr. Sotto told reporters in a mobile phone message, for his part.

The Senate in the letter expressed grave concern over the prediction of the oil traders of S&P Global Platts Asia Pacific Petroleum Conference in Singapore, as cited by the Department of Energy’s oil monitor report, that crude oil prices could increase to over $100/bbl in 2019.

They asked Messrs. Duterte and Dominguez to support their initiatives to suspend any further increases on fuel excise tax “before the TRAIN Law’s ‘trigger period.’”

“Hence, considering that the high crude oil prices are projected to continue increasing, we respectfully request your Excellency and DoF Secretary Carlos Dominguez III to support our initiatives to suspend any further increases in excise taxes on diesel, gasoline and other petroleum products before the TRAIN Law’s ‘trigger period,’” they said.

The senators said the suspension of fuel excise tax hike “would help lift the heavy burden” that Filipinos have been experiencing amid the rising prices of basic goods and services. — Elijah Joseph C. Tubayan, Arjay L. Balinbin and Camille A. Aguinaldo