The Department of Finance (DOF) clarified on Wednesday that the government, under the new tax reform law, can only suspend further tax rate increases, not stop the collection of excise tax, when fuel prices hit $80 a barrel.
Presidential spokesperson Harry Roque was reported as saying on Tuesday that the government, under the Tax Reform for Acceleration and Inclusion (TRAIN) Act, could suspend the collection of excise tax on fuel when global oil prices reached $80 a barrel.
On Wednesday, finance officials pointed to the TRAIN law provision, which states: “For the period covering 2018 to 2020, the scheduled increase in the excise tax on fuel as imposed in this section shall be suspended when the average Dubai crude oil price based on Mean of Platts Singapore for three months, prior to the scheduled increase of the month reaches or exceeds $80 per barrel.”
Roque clarification
Roque clarified on Wednesday that he was referring to increases in excise tax when he spoke about suspension on Tuesday.
“That’s what I meant when the law will be suspended because the law calls for increase [in] excise tax, isn’t it?” Roque said in a text message.
He said he gave the TRAIN law provision on suspension a “literal meaning.”
“If I’m mistaken with my interpretation, so be it. But I quoted the text [of the law],” he said.
Under the TRAIN law, an excise tax of P2.50 a liter is imposed on diesel and bunker fuel starting January this year. This rate will go up to P4.50 in 2019 and P6 in 2020.
The excise tax on gasoline has already increased from P4.35 a liter to P7. It will go up to P9 in 2019 and P10 in 2020.
The tax increase has jacked up the prices of basic goods and services, which have risen further with the fuel price increases in recent weeks.
Consumers and merchants are complaining, but the government insists it is too early for the TRAIN law to affect prices.
‘Real-life solutions’
On Monday, the Trade Union Congress of the Philippines (TUCP) urged the government’s economic managers to stop denying the ill effects of the law and start dealing with the problems with “real-life solutions.”
“With the increasing prices of rice and other basic commodities and services without corresponding increases in real wages, even those who [belong to the middle-income class] could fall below the poverty line,” Vicente Camilon Jr., spokesperson for the TUCP, said.
One solution the government could apply to ease the impact of the TRAIN law, he said, is to cut the cost of electricity.
Camilon said power rates could be cut by junking the performance-based rate used by the Energy Regulatory Commission and reverting to the return-on-rate base model.
Under the return-on-rate base model, he said, consumers can save up to 30 percent on electricity cost, as the power suppliers will pay for their own expenses, unlike in the current model where the suppliers charge their costs to the consumers.