DoF preparing rules to re-impose fuel excise hike

IMPLEMENTING RULES and regulations (IRR) for re-imposing the next P2 fuel excise tax following its planned suspension in 2019 are expected soon.

Finance Assistant Secretary Antonio Joselito G. Lambino II told reporters on Friday that the Department of Finance (DoF) and the Bureau of Internal Revenue (BIR) are currently drafting the IRR on reimposing the suspended tax hike when the global crude benchmark prices fall. The tax reform law is currently silent on the conditions necessary for reimposing the fuel tax hike.

“That’s in a very advanced stage of finalization and it will be ready very soon. So it’s reasonable to explore that suspension for lifting, the mechanism for lifting the suspension could be something like a three month average of below $80 per barrel (/bbl),” he said.

Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion Act (TRAIN) that took effect in January, raised fuel excise taxes by P2.50 per liter this year and is scheduled to add P2/liter and P1.50/liter in 2019 and 2020, respectively, totaling a P6/liter excise tax hike.

The law allows the hike in fuel taxes to be suspended when the Dubai crude benchmark averages $80 per barrel or more in the three months prior to the scheduled increase.

Malacañang announced last week its intention to suspend the scheduled tax hike even before the three-month trigger event. The Dubai crude benchmark began exceeding $80 in late September.

Finance Undersecretary Karl Kendrick T. Chua said the law provides for automatic implementation of tax hikes such that by 2020, fuel will be taxed at the full P6 per liter.

“There is already the law that provides the scheduled increase. So if you suspend for one year, by 2020 you have to apply the full amount. So that is the minimum, but if you suspend after one year you have to apply the next increase if the prices do not go above $80,” he said.

The DoF has said that the forgone revenue from suspending the P2 hike in 2019 amounts to P41 billion. Taking into account the higher value-added tax (VAT) take from higher oil prices and the peso’s depreciation, the net forgone revenue would be around P27 billion.