Higher Fuel Excise Tax Now In Effect, Whether We Like It Or Not

A new year, a new round of increase in fuel prices.

No thanks to the Tax Reform for Acceleration and Inclusion (TRAIN) law, motorists have to deal with a fresh increase in fuel prices brought about by higher fuel excise duties.

Fuel Excise Tax

Unleaded gasoline will now carry excise duties of P1 a liter, while diesel’s excise duties will be P1.50 per liter. Meanwhile, liquid petroleum gas will have an excise duty of P1 per kilogram. The increase in fuel excise duties, and the corresponding retail price hikes, began on Wednesday (January 1, 2020).

This is the third increase in the excise duties for fuel brought about by TRAIN, and (quite) luckily, also the last.

TRAIN and fuel excise duties

The TRAIN law, otherwise known as Republic Act 10963, was signed into law on December 19, 2017. The overall goal of TRAIN, which basically overhauled the country’s taxation system, was to lower income taxes while still supporting the government’s economic goals and infrastructure programs.

Because the lowered income tax rate meant that the government would be collecting fewer taxes, TRAIN levies higher taxes on certain identified services and products. One of these is fuel.

TRAIN calls for a three-tier increase in the excise taxes of petroleum products. Check out the table below to see the schedule and rate of the increases.

First Increase (2018) Second Increase (2019) Third Increase (2020)
Gasoline P7 P9 P10
Diesel P2.50 P4.50 P6
LPG P1 P2 P3

(Read: Fuel Excise Tax In The Philippines: How It Changes The Way We Drive)

As you can see, the increases were done incrementally over time, with gas, which pre-TRAIN had an excise tax of P4.35, increasing by first P2.65, than P2 and finally P1.

Aside from excise taxes, another factor fueling the fuel price increase will be the 12% value added tax.

Even before the imposition of the tax increase, fuel companies had already hiked their prices to reflect developments in the international oil trading sector. According to a GMA News Online report, there was the following price increases by Chevron, Flying V, Petron, Pilipinas Shell, and Seaoil:

Product Price Increase Per Liter
Gas P0.85
Diesel P0.50

Cleanfuel, Phoenix Petroleum, Petro Gazz, and PTT Philippines were also reported to have made similar price adjustments.

(Read: Will Fuel Excise Taxes Be Suspended Amid Price Hikes? Not Really, Says The DOF)

A few caveats

While the new tax rates are already in place, according to a report by Rappler, the Department of Energy (DOE) said that they are only to be imposed on new stock.

This means that fuel products imported from January 1, 2020 up will bear the new excise duties. This also means that fuel companies should deplete their existing stocks before they can hike prices to make up for the new duties.

According to Energy Undersecretary Jesus Posadas, applying the new taxes to the price of fuel products imported or produced either before or on December 31, 2019 will be a violation of the TRAIN law. Fuel companies that do this could face administrative and criminal charges.