Gov’t prepares to cut spending

The proposed suspension of the increase in excise taxes on fuel next year will only result in a delay in their collection and not a complete cancellation, as the law mandates fiscal authorities to recoup foregone revenues once the scheme resumes, the Department of Finance clarified.

Despite the delay in the collection of an estimated P41 billion in revenues that the higher excise taxes would have brought in, officials said the government’s aggressive infrastructure buildup program would not be adversely affected.

Instead, Finance Undersecretary Gil Beltran said sacrifices would have to be made in the government’s budget for maintenance and other operating expenses (MOOE) and personnel services for the sake of leaving the cornerstone of the Duterte administration’s economic program untouched.

“We will lose P41 billion from excise taxes, but we will recover P14 billion from value added taxes,” he said. “So the net impact will be P27 billion. But we will try to look for expenditures to cut to bring back the fiscal [deficit] to 3.2 percent [of GDP].”

“We won’t touch the infrastructure spending,” Beltran added. “Most of [the spending cuts] will be in MOOE and personal services, referring to expenses made for paying wages of state employees.

To this end, Department of Finance spokesperson Antonio Lambino II said the interagency Development Budget Coordination Committee—composed of officials of the DOF, the Department of Budget and Management and the National Economic and Development Authority—is “forming a task force that will look for those expenses” that can be cut to compensate for the lower tax revenues that the suspension of excise taxes on fuel would bring.

The TRAIN law, which took effect on Jan. 1 of this year, levied an excise tax of P2.50 per liter on diesel for 2018, which will increase to P4.50 per liter in 2019, and P6 per liter in 2020.

Meanwhile, excise tax on gasoline was increased to P7 per liter this year, from P4.35 per liter previously. This rate is scheduled to rise to P9 per liter and P10 per liter for 2019 and 2020, respectively.

Malacañang decided to suspend next year’s scheduled excise tax hikes—even if the conditions stated in the law of an $80 per barrel average price of Dubai crude in the last quarter of the year had not yet been met—due to the outcry from the public that had been struggling under nine-year-high inflation rates in recent months.

During the press briefing, Finance Undersecretary Karl Kendrick Chua reiterated that the collection of these taxes would only be deferred temporarily, but would have to be recouped once the suspension is lifted, most likely in 2020.

At that point, he said the law provides that the tax levies scheduled for that year, as well as the foregone hike from the previous year, will both come into effect.