By Bernadette D. Nicolas, October 11 2018; Business Mirror
Image Credit to Business Mirror
FOLLOWING the President’s pronouncement that he may suspend excise taxes on oil, the Department of Finance said on Wednesday the suspension will not significantly lower oil prices.
This was after President Duterte said late Tuesday in a press briefing with Palace reporters that he may suspend excise taxes on oil under the Tax Reform for Acceleration and Inclusion (TRAIN) law.
Different groups have already called on the government to suspend fuel excise taxes amid rising inflation. Inflation has already soared to a new nine-year-high at 6.7 percent, bringing the year-to-date at 5 percent.
However, Finance Assistant Secretary Tony Lambino pointed out that there is a need to look more closely into the potential effect on suspension of fuel excise taxes, as he noted that the additional excise taxes comprise 25 percent of the increase in fuel prices.
“The 75 percent will be there whether there is TRAIN or not,” Lambino said.
The DOF had earlier on pointed to the steady rise in global oil prices, saying that—and not so much the TRAIN law-mandated excise taxes —are to blame for inflation.
“So I think we also need to manage the expectations in that sense that if Congress decides to create a new suspension mechanism. The oil prices will not really go down because the import price rose from around high $40 per barrel to now above $80 per barrel, and the import price is something, unfortunately, we do not control because we are not an oil producer, and we are the price-taker when it comes to the world market,” he added.
Nonetheless, he said they are still looking at all the advice they have received as he took note of what the President said. Finance Secretary Carlos G. Dominguez III is studying the issue very closely.
“We’ll seek a clarification from Secretary Dominguez as to what the conversation between him and the President is, regarding this matter,” he said.
He also pointed out that suspending the fuel excise taxes prior to the requirement under the law—the TRAIN law says it may be suspended if world prices hit $80 a barrel for at least three months—must still require some sort of legislative action.
“Perhaps, such has been recommended, or maybe other legislative action, because the excise tax rates are already in the law. So if we suspend based on the mechanism that is in the TRAIN law, then that can be automatic. But if we do something else, it would require different actions,” he said.
Section 5 of Revenue Regulation 2-2018, which provides implementing guidelines for petroleum products under the TRAIN law, states that: “For the period covering 2018 to 2020, the scheduled increase in the excise tax on fuel as imposed shall be suspended when the average Dubai crude based on Mean of Platts Singapore for three months prior to the scheduled increase of the month reaches or exceeds eighty dollars [$80] per barrel.”