Oil price breach opens door to excise tax relief

The Department of Energy (DoE) has triggered the process for possible excise tax relief on petroleum products after Dubai crude breached the $80-per-barrel threshold, potentially opening another layer of assistance for consumers facing sharply higher fuel prices.

Energy Secretary Sharon Garin said the average Dubai crude benchmark reached $99.41 per barrel from 13 August to 11 September, exceeding the threshold prescribed under Republic Act 12316. “This is already above the threshold set by law,” Garin told reporters on Tuesday.

The DoE has certified the breach and transmitted it to the Development Budget Coordination Committee (DBCC), which will determine whether to recommend reducing or fully suspending excise taxes on petroleum products.

Process starts but no automat tax cut

Rino Abad, director of the DoE’s Oil Industry Management Bureau, stressed that crossing the $80 threshold only starts the process and does not automatically result in a tax cut.

“The Republic Act 12316 authorizing the President to either reduce or suspend the application of excise tax on petroleum products includes all types of products. But of course, based on that law, it requires the recommendation first from the DBCC,” Abad said.

“Of course, with the certification from the Department of Energy, the trigger will be upon reaching the US$80 Dubai crude oil price,” he added.

The Executive Order (EO) would subsequently be implemented through a revenue regulation, following the same mechanism used when the government suspended excise taxes on kerosene and liquefied petroleum gas in April.

The scope and size of any new tax relief, however, have yet to be determined.

“We still do not know what will come out of the DBCC resolution recommending to the President, and ultimately the EO that will be issued by the President. We don’t have the particulars yet on which products will be covered and whether the excise tax will only be reduced or totally suspended,” Abad said.