President Rodrigo Duterte has backtracked from his earlier promise to temporarily suspend the implementation of the second tranche of oil excise tax for 2019 as he approved its proposal during the Cabinet meeting, Malacañang confirmed Tuesday.
“The President has approved the recommendation of the Development Budget Coordination Committee to proceed with the implementation of the second tranche of the excise tax on fuel, effective January 2019,” Presidential Spokesman Salvador Panelo said in a statement Tuesday night.
According to Panelo, Duterte and the Cabinet members considered several factors before reaching a decision.
“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,” he said.
The Palace official explained that under the Tax Reform Acceleration and Inclusion law, the suspension of excise taxes was only provided when the global price of oil averages at $80 per barrel or higher for three consecutive months.
The current oil price in the world market, however, has gone down from $53 to $52 per barrel.
“Hence, the legal requirement for the suspension of the excise tax on fuel cannot be met,” Panelo said.
Asked what convinced the President to backtrack on his previous decision by finally greenlighting the recommendation, Budget Secretary Benjamin Diokno told Palace reporters that Duterte was just “simply implementing the law.”
For his part, Diokno added that the economic managers huddled on three arguments to come up with a decision.
They discussed the sudden change in the oil prices abroad, the non-existence of provision for such suspension, and massive revenue loss.
“First, [we talked about] the sharp turnaround in world crude prices. From a peak of close to $80 per barrel (pb) to $68pb in Nov. 29, with Dubai Futures prices projecting further decline below $60 per barrel in 2019,” Diokno said.
“At its peak, diesel price was P49.80 per liter, it will be P37.76 in (sic) Jan 19, inclusive of the P2 peso excise tax. For gasoline [95 octanes] it was P60.90 at its peak, it will be 50.82 on Jan. 19 inclusive of P2 additional excise tax,” he added.
The Budget chief also said the condition for the suspension of the fuel excise tax did not exist.
He also underscored that the huge revenue loss, which was estimated at around P43.4 billion, was a factor.
This recent development came after the President, upon the recommendation of the economic managers, approved last two weeks ago the deferment of the second round of fuel tax increases for next year.
Under the TRAIN law, higher taxes on fuel products were implemented that took effect at the start of 2018.
Under the law, the second round of fuel tax increases is scheduled to take effect for 2019. However, it can only be suspended “when the average Dubai crude oil price based on Mean of Platts Singapore for three months prior to the scheduled increase of the month reaches or exceeds $80 per barrel.”
Meanwhile, the Palace assured the public that they would still provide financial assistance to poor Filipino households.
“While the oil excise tax increase is a negligible contributor to inflation, we still commit to provide financial assistance to the 50 percent poorest households,” he said.