President Duterte approved the implementation of the second tranche of excise tax on petroleum products effective on 1 January 2019 on the back of moderating inflation and easing global oil prices.
The approval was announced during a Cabinet meeting on 4 December, following a Development Budget Coordination Committee recommendation to push ahead with the implementation of an additional P2 excise tax per liter on gasoline and diesel.
According to the Department of Budget and Management (DBM), even with the oil excise tax increases, pump prices should still be lower by around P10 to P12 compared to its peak in October this year.
Diesel peaked at only P49.50 per liter during the month while price projection once the petroleum excise taxes have been implemented next year is P37.76.
Ninety-five-octane gasoline likewise peaked at P60.90 per liter but projected to fall to P50.82 even with the P2 additional excise tax starting January.
“Economic conditions have changed from the time the suspension was recommended, and it is our duty as economic managers to respond to these developments,” Budget Secretary Benjamin E. Diokno said.
Diokno also emphasized that they are only following the Tax Reform for Acceleration and Inclusion (TRAIN) law for the implementation of the oil excise tax hike.
Under Republic Act 10963, or the TRAIN law, the scheduled increase in the excise tax on petroleum products can only be suspended if the average Dubai crude oil price based on Mean of Platts Singapore amounts to or exceeds $80 per barrel within a three-month period.
Dubai crude oil prices are seeing continuous rise, recently plummeting by 14 percent to $68 per barrel in late November from the $79 per barrel recorded in October this year.
Economists are also positive that global oil prices will still fall further to below $60 per barrel in 2019, which is then expected to lead to a downward trend in prices.
The decline in the prices of petroleum products is also what urged the Land Transportation Franchising and Regulatory Board to bring the minimum jeepney fare back to P9 in the National Capital Region, Region 3 and 4.
Should Dubai crude oil prices average $65 per barrel in 2019, the government is set to lose P43.4 billion in full-year net revenue if not for the implementation of the second tranche of oil excise taxes.
“As you know, we are trying to maintain the deficit at a sustainable level of 3.2 percent of gross domestic product in 2019,” Diokno said.
“A loss of P43.4 billion in revenues will lead to a commensurate decrease in government expenditures.”
Inflation rate dipped to a flat 6.0 rate for the month of November as announced by the Philippine Statistics Agency yesterday. This is also attributable to government efforts to ease price pressures by boosting food supply particularly staple commodities such as rice, meat and vegetables.
According to Diokno, the government is also set to focus on agriculture, which he regarded as the weakest link in the country’s economic growth.
“The takeaway here is we must focus on agriculture, because it is the weakest link in our economy. In fact, we expect agriculture to contribute around 3 percent,” he said.
He estimated the sector contributes maybe only 2.4 percent or even a negative number.
Diokno referred to the passage of the rice tarrification as a big impact in further curbing inflation rates by lowering the price of rice per kilo.
This is also on top of Bangko ng Sentral ng Pilipinas’ cumulative interest rate hike of 175 basis points since May of the year. With the aid of the aforementioned collective actions, the Central Bank is projecting that inflation would be back to the 2 percent to 4 percent range in 2019 and 2020.