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Metro Manila (CNN Philippines, October 24) — Presidential Spokesperson Salvador Panelo said the Palace will soon make an announcement regarding the economic managers’ recommendation to suspend the additional fuel excise tax next year.
In a media briefing Wednesday, Finance Assistant Secretary Lambino said the recommendation is already with the Palace, and that they are just awaiting an official document from President Rodrigo Duterte.
Panelo on Wednesday confirmed that Malacañang has, indeed, received the document, and that the country’s chief executive is in the process of reviewing it.
“(The President) is now reviewing the recommendation and let us just wait for an announcement through an executive issuance in this regard,” Panelo said.
All systems go
With the recommendation only awaiting a formal approval from the President, the Finance Department said it’s all systems go for the partial suspension of the fuel excise tax increases.
Finance Undersecretary Karl Kendrick Chua said the suspension will no longer need to be adopted into a new law as the current Tax Reform for Acceleration and Inclusion (TRAIN) Law already provides a clause for automatic suspension when prices of crude oil reach 80 dollars per barrel.
Brent crude oil which is used as one of the benchmarks for oil prices worldwide along with Dubai crude oil, reached an intra-day high of $80.50 on May 17 before closing at $79.30 a barrel. Opposition senators have called for the suspension of fuel excise tax increases for next year.
“We believe there is no need (for a new law). It is provided in the law when the crude price reaches or exceeds 80 dollars per barrel here is an automatic suspension so what we are waiting now is to formalize it. That is in the law,” Chua explained.
He added that the suspension will only cover the increases set for the first quarter of 2019, excluding the increases that have already been implemented for this year as provided by the TRAIN Law.
Should the global price of crude oil decrease next year, the economic managers would have to review if a resumption of the increases would be needed.
“If it goes slower then the secretary said we can review it next year but the recommendation to suspend still stands,” Chua said.
The TRAIN law which took effect in January, directs an increase in the excise tax imposed on oil products from 2018 to 2020. For 2019, the excise tax on fuel products will go up by another ₱2 per liter starting January.
President Rodrigo Duterte had earlier decided to suspend the increases in January 2019, according to Finance Secretary Sonny Dominguez, after inflation hit a nine-year high of 6.7 percent in September this year.
‘Unnecessary suspension’
Meanwhile, several agencies argued that the suspension of the fuel excise tax increases is unnecessary to curb inflation.
Action for Economic Reforms (AER) Researcher AJ Montesa said since the government is eyeing rice tariffication, and oil prices are expected to go down next year, then the solution to the country’s inflation problem is not the suspension of increases in fuel excise tax.
“In 2019 prices crude oil is to fall so suspension of fuel excise tax increase in the first quarter is reasonable but later on it may not be as reasonable…Suspending oil excise tax is not the solution we should be looking,” Montesa said.
Bangko Sentral ng Pilipinas Assistant Governor Francisco Dakila reported that a full suspension of increases on the fuel excise tax can lead to a 0.2 point decrease in inflation next year. According to the BSP, the baseline forecast for inflation in 2019 is 4.3 percent. With the suspension, this will drop to a 4.1 percent inflation rate, Dakila said.
However, he also argued that a greater reduction in inflation could result from maintaining the fuel excise tax increases and allowing the effects of rice tariffication to kick in. The baseline forecast of the BSP does not yet take into account rice tarriffication, he added. Dakila said rice tariffication could lead to a 0.7 decrease in inflation for 2020.
Montesa added that the weight of oil prices for the poor is less than the impact of rice prices.
“Data from PSA supports only five percent of the basket of bottom 30 percent (of the population) is due to fuel and 60 percent is due to rice,” he said.
President Duterte earlier ordered to certify as urgent a bill that seeks to remove quantity restrictions in rice importation. The House filed a measure in August but this has yet to receive Senate approval.
READ: Gov’t fuel subsidy program may face budget slash amid suspension of additional oil excise tax
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