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By Rea Cu, November 27 2018; Business Mirror

https://businessmirror.com.ph/dof-reviewing-mechanics-of-fuel-excise-tax-suspension/

Image Credit to Business Mirror

THE Department of Finance (DOF) is reviewing the measure on the suspension of the fuel excise tax increase for 2019, looking at how to shorten the period of the suspension when it is implemented next year.

Finance Secretary Carlos G. Dominguez III said at the sidelines of the Sulong Pilipinas 2018 on Monday at Clark, Pampanga, “We are currently, again, reviewing it. This is a totally unexpected development, although it’s a pleasant development. I hope we have more developments like this, but we are currently reviewing the situation, especially now that prices has gone down to $55 per barrel or thereabouts. So that’s going to have a big effect in the reduction in inflation.”

He added that the review of the suspension measure would start by January 1, 2019.

“The law is very clear. The law says it has to be $80 and above for three months…. So it’s under review at the moment,” he added.

Under the Tax Reform for Acceleration and Inclusion (TRAIN) law, the excise tax on diesel imposed in 2018 is at P2.50 per liter, with an additional P2 to be imposed in 2019, and P1.50 per liter in 2020. This brings the excise tax on diesel to P4.50 per liter in 2019, and P6 per liter in 2020.

From the previous P4.35 per liter, excise tax on gasoline was increased to P7 this year, with an additional P2 increase in 2019, and P1 in 2020. For 2019 and 2020, the rates will be at P9 per liter and P10 per liter, respectively.

Under the TRAIN law, the excise tax increase may be suspended if the international price of Dubai crude breaches the $80-per-barrel threshold for three months. The law was silent on the mechanism for lifting the suspension.

The DOF said suspending the scheduled excise tax increase for fuel in 2019 may lead to an estimated revenue loss of P41 billion. It added, however, that value-added tax collections, pegged at P14 billion, may help offset part of the losses.

Earlier in the month, it was reported that the government is holding off the increase in fuel excise tax of P2 per liter in 2019, as President Duterte has given his go-ahead to the inflation-busting recommendation of economic managers.

Budget Secretary Benjamin E. Diokno, Finance Secretary Carlos G. Dominguez III, and Socioeconomic Planning Secretary Ernesto M. Pernia were informed by Executive Secretary Salvador C. Medialdea that the President had approved their proposal in a memorandum dated November 8. Energy Secretary Alfonso G. Cusi was also given a copy of the memo.

Economic managers made a pitch for suspending the scheduled increase in fuel excise tax after inflation surged in recent months.

“Well the President has approved it already, but again, we have to look at the facts on the ground. But, most likely, we will do it. [It] depends on the prices; two months ago, I thought it was going to be above $80 [per barrel]. The projection was $80; actually, we were wrong, the market was wrong,” he said.