No fuel tax hike

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PCOO File Photo

Tariffication certified to tame inflation

Go said the decision to defer the tax implementation was made to arrest the rising price of oil and its effects on the inflation rate

President Rodrigo Duterte has taken a direct hand at beating high inflation through the suspension of an additional P2 per liter excise tax on fuel and certifying to Congress as urgent the rice tariffication bill.

Inflation soared to a record high 6.7 percent last month with food and non-alcoholic beverages which included rice, contributing 9.7 percent to consumer prices. The tariffication bill which seeks to remove import limits is pending at second reading in the Senate.

The implementation of the additional fuel excise tax is suspended to tame inflation, Special Assistant to the President Christopher Lawrence “Bong” Go said.

The temporary suspension will be in effect until the right time comes to activate it

There is a wide clamor for the government to freeze the tax to temper domestic oil prices.
On 10 October, Mr. Duterte said suspending excise tax on oil products is an option being considered to ease inflation.

“Maybe,” Duterte told reporters in Malacañang when asked about the proposal.

In a speech in Taguig City, Go said the decision to defer the tax implementation was made “to arrest the rising price of oil and its effects on the inflation rate.”

Finance Secretary Carlos Dominguez confirmed Go’s statement, saying that Mr. Duterte is “making an early announcement on the temporary suspension of the January 2019 oil excise increase.”

Socioeconomic Planning Secretary Ernesto Pernia added that economic managers have agreed to the tax suspension.

Senate backs move

Senators applauded Malacañang’s move as it came after the majority bloc wrote President Duterte to urge the tax suspension.

In a letter dated 9 October, the Senate majority led by Senate President Vicente Sotto III solicited the support of the President for both Houses of Congress “to suspend any further increases in excise taxes on diesel, gasoline and other petroleum products for 2019 and 2020.”

The letter was signed by 17 members of the Senate majority bloc.

“That is the reason why PRRD (Mr. Duterte’s initials) decided to suspend the excise tax,” Sotto said.

The senators noted that while the two tranches of increases in excise taxes are mandated by Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) law, the suspension was part of the safeguards formulated by Congress.

“Congress placed a safeguard mechanism in the TRAIN Law to protect constituents from any possible negative impact of such increases in oil prices — providing that the next scheduled increase in excise taxes on petroleum products shall be suspended when the average Dubai crude oil price based on Mean of Platts Singapore for three months prior to the next increase reaches or exceeds $80 per barrel,” the senators stated.

As of the first week of October, the average price of Dubai crude oil breached $80 per barrel. In fact, last 4 October, the price went as high as $84.41 per barrel.

Even the Senate minority bloc welcomed the Malacañang’s move — claiming it as a victory of the Filipino people.

Part of TRAIN

The second tranche of the excise tax on fuel, amounting to at least P2 per liter, was supposed to take effect in January next year.

Go said the temporary suspension will be in effect “until the right time” comes to activate it.

In 2018, the government imposed a P2.50 tax per liter of diesel and P1 on liquefied petroleum gas under the first tranche.

The TRAIN law targets a total of P6 per liter on oil products, spread over three years starting 2018 up to 2020.

Finance Undersecretary Karl Chua earlier said a suspension of excise tax increases on petroleum products under the law is possible but only if global crude prices average $80 per barrel in the last quarter of 2018.

Quick passage seen

A Palace certification is expected to speed up the approval of Senate Bill 1998 which seeks to replace the quantitative restriction on rice and replace it with tariff.

Removing import restrictions in exchange for tariffs creates a competitive market which means more rice availability and more reduced prices which in the end will benefit consumers, Go said.

He added the bill is consistent with Mr. Duterte’s pronouncement to curb corruption and institute good governance in the rice market.

“The measure will help achieve stability of rice supply because rice is imported easily to the country, therefore, helping bring down the prices; prevent artificial rice shortages and curtail corruption and cartel domination in the rice industry,” he said.

The TRAIN law targets a total of P6 per liter on oil products, spread over three years starting 2018 up to 2020.

Agriculture Secretary Manny Piñol also expressed optimism the suspension of the added fuel excise tax can further reduce prices of basic food items, particularly fish thus, easing the impact of inflation on consumers.

“It has a huge impact especially for fisheries because 60 percent of expenses of fisheries is on fuel,” Piñol told reporters on the sidelines of the launching and opening of TienDA Malasakit Store in Taguig City.

“I’m happy that the President has correctly pointed out fuel as the main driver of inflation,” he said.
Piñol noted prices of other commodities had stabilized, especially vegetables amid steady supply after typhoons and rice with the start of harvest season and importation.
“Hopefully by the last week of October, everything will be stable,” he added.

Manage expectations

Finance Assistant Secretary Tony Lambino cited the need to “manage expectations” that inflation might remain high despite the suspension of the excise tax.

“The price of oil won’t have a drastic reduction because the import price is still increasing from $40 per barrel to now above $80 per barrel,” Lambino said.

“Unfortunately, we do not control prices because we are not an oil producer and price-takers when it comes to the world market,” he added.

Economic managers had said the rising prices of petroleum products is the main contributor to the inflation surge.

“When you say price increase, the next day pandesal will be next. When you say price increase in oil is now 154 or 156 per barrel, everything will go up,” Duterte had said.

Aside from the suspension of the excise tax on oil, Duterte earlier issued three directives to concerned government agencies in an effort to cushion the impact of oil price hikes on Filipinos.

He ordered the Department of Trade and Industry to monitor and arrest traders who take advantage of the oil price hike by raising prices further, the Department of Labor and Employment to meet and consider raising minimum wage and the Department of Energy to import cheaper oil products from countries that are not members of the Organization of Petroleum Exporting Countries (OPEC), such as Russia.

At present, the Philippines sources fuel from OPEC-member states.

with Mario J. Mallari

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