Palace OKs implementation of 2nd fuel tax hike

As mandated under the Tax Reform for Acceleration and Inclusion (TRAIN) Act, President Duterte has given his go-ahead to implement the second tranche of oil excise tax increase next year amid sliding international crude prices.

When global prices touched $80 a barrel in October, economic managers had recommended the suspension of the levy hike in the first quarter of next year.

As global prices started to soften, the Cabinet-level Development Budget Coordination Committee (DBCC) backtracked on its position and told the President to push through with the excise tax hike.

“Economic conditions have changed from the time the suspension was recommended, and it is our duty as economic managers to respond to these developments. That is the crux of economic planning,” Budget Secretary Benjamin E. Diokno yesterday said in a statement.

On Tuesday night, the Cabinet discussed in a special meeting the DBCC’s updated recommendation and the President decided to follow it.

“Dubai crude oil prices have plummeted by 14 percent—from an average of $79 per barrel in October to $68 per barrel in late November. Furthermore, the oil futures market projects that world oil prices will fall further to below $60 a barrel in 2019, indicating a downward trend in prices,” Diokno said.

Even with the additional P2 a liter under the second tranche of the excise tax increase, pump prices will be lower by about P10-12 a liter compared to its peak in October. Diesel at its peak was P49.80 a liter. It is seen to hit P37.76 in January, inclusive of the tax hike. Similarly, gasoline at its peak was P60.90 a liter. It is projected to hit P50.82 with the P2 additional excise tax in January 2019, the budget chief said.

Diokno said the condition under which the fuel excise tax hike could be suspended “does not exist,” referring to the TRAIN law’s provision that the suspension could happen only when Dubai crude prices average $80 a barrel over a three-month period.

Diokno also said the temporary suspension of the excise tax increase would result in foregone full-year revenue of P43.4 billion. “We are trying to maintain the deficit at a sustainable level of 3.2 percent of gross domestic product (GDP) in 2019. A loss of P43.4 billion in revenue will lead to a commensurate decrease in government expenditures,” he said.

The TRAIN law slapped an excise tax of P2.50 a liter on diesel and bunker fuel starting this year. This will go up to P4.50 in 2019, and P6 in 2020.

The excise tax on gasoline also increased from P4.35 per liter to P7 in 2018, and then to P9 next year, and P10 in 2020.

Finance Secretary Carlos G. Dominguez III told reporters yesterday that the government would continue to monitor the global oil price situation.