The President has green-lighted the implementation of the second round of fuel excise tax hikes. The said increase in the fuel excise tax will be carried out starting January 01, 2019.
In October, news broke that the government was going to suspend the fuel excise tax’s second tranche under the Tax Reform Acceleration and Inclusion (TRAIN) Law. However, it is now being reported that the administration has decided not to suspend the tax hike.
Budget Secretary Benjamin Diokno confirmed the approval of the second round of fuel excise tax hikes in a message to Rappler last Tuesday. According to Diokno, the ratification is meant to implement the existing TRAIN law.
“Yes. He’s simply implementing the TRAIN law. Even with the second tranche, oil product prices will be P10 lower than their peak some time in October,” he said.
The decision to push forward with the fuel excise tax hike took place after a meeting that was attended by the Development Budget Coordination Committee (DBCC), the President’s economic managers, who are also the ones who endorsed the execution of the said law.
They stated that the recommendation to push through with the hike is in line with the recent decline in world oil prices. “Dubai crude oil prices have gone down by 14% from an average of $79 per barrel in October down to $68 per barrel so far in November.”
The petrol battles
Current world crude prices, which almost hit $80 per barrel this year, are forecast to go down next year to about $60 per barrel. That said, the prices of petrol here are also expected to go down as 2019 begins.
The prices of diesel, which reached up to P49.80 per liter during its peak in 2018, is anticipated to go down to P37.76 per liter next year. Same goes with the prices of 95-octane gasoline, which soared to P60.90 during its peak this year. Gasoline prices are expected to go down to P50.82 in 2019. All prices are already inclusive of the P2 additional excise tax under the first tranche of the TRAIN law.
Under the TRAIN Law, an additional levy of P2.24 per liter—P2 for the excise tax and 24 centavos for the value-added tax (VAT)—on both diesel and gasoline should be imposed effective 1st of January 2019. This would be followed by another increase of P1.50 per liter in 2020.
According to Presidential spokesperson Salvador Panelo, under the TRAIN law, excise taxes should be suspended only when the prices of crude oil in the world market hit an $80-mark per barrel or higher for three successive months.
“The current oil price has gone down to 53 to 52 dollars per barrel hence the legal requirement for the suspension of the excise tax on fuel cannot be met,” he said.
He even added that the whole committee accomplished an array of deliberations first to consider various factors before fully deciding to push through with the increase.
“Due consideration was given to several factors including, but not limited to: the downward impact on inflation owing to the steep drop in the Dubai crude oil price, the disruption in the BBB infrastructure program, and reduction in budgets including personal services of national government agencies should excise tax on fuel be suspended,” said Panelo.
“While the oil excise tax increase is a negligible contributor to inflation, we still commit to provide financial assistance to the 50% poorest households,” he added
A huge revenue loss estimated to P43.4 billion is expected if the government will continue with the suspension of the second round of increase in fuel excise tax.