Gov’t to suspend fuel tax
Subsidy for jeepney franchise holders may be reduced to 110,000
The collection of 12 per liter of fuel tax will be suspended for three months starting January next year. Finance Undersecretary Karl Kendrick Chua revealed this when he appeared before the Senate Economic Affairs Committee on Wednesday. He said there is no need for Congress to pass a law to implement this as the automatic suspension of the excise tax that had contributed to a high inflation rate is already mandated by the controversial Tax Reform for Acceleration and Inclusion (TRAIN) Law.
Due to the potential revenue loss from the imminent suspension of the fuel excise, jeepney franchise holders may receive 110,000 instead of 120,000 in fuel subsidy next year, Finance Assistant Secretary Antonio Joselito Lambino said.
The hearing on the impact of suspending the excise on fuel as counter inflationary measure, its fiscal impact under the TRAIN Law, its overall impact on the economy, and the status of the implementation and effectivity of the social mitigating measures was based on a resolution filed by Sen.
Sherwin Gatchalian, Senate Economic Affairs Committee chairman.
The TRAIN Law specifically states that the collection of excise on oil products shall be suspended automatically when the price of imported crude oil breaches the $80 per barrel level for three consecutive months.
But critics said the TRAIN Law and the high prices of rice because of supply problems threw the economy helterskelter as it triggered a high inflation rate that hit the 6.7 percent level last September.
They pointed out that economic managers should now delete the P2 per liter excise tax collection from the TRAIN Law to help normalize the economy.
This reasoning is anchored on the expected under-spending of the national budget, they said.
This will be caused by the decision of the Department of Budget and Management (DBM) to shift the budgeting process from obligation budget to cash, they added.
What the government collected from TRAIN Law for the first half of 2018 was 133.7 billion, Chua said.
The projected TRAIN Law collection for the whole 2018 is 163.3 billion, he added.
Chua said the DOF recommendation for the automatic suspension of the collection of excise on fuel was based on the TRAIN Law.
He said this is based on the futures market showing an above $80 per barrel price level from October to January.
So the DOF can unilaterally suspend the excise collection without the government going to Congress for a legal basis, Chua told Gatchalian.
After a three-month suspension of the collection of excise, Chua said the TRAIN Law is “less clear on when we can resume” collecting the fuel tax.
“That is currently being discussed,” Chua told Gatchalian when asked if the suspension could cover the entire 2019
“The Secretary (Carlos Dominguez) has opined that if the suspension is based on three months, then the resumption could be based on a three-month cycle. That is his opinion. We are discussing it,” Chua added.
Meanwhile, Lambino said the government could only double the existing 15,000 fuel subsidy, not quadruple the amount as originally planned, if the suspension of the fuel tax pushes through in 2019.
“The DBM has mentioned an adjustment on the Pantawid Pasada. It would have been 120,000 initially if the increase excise tax will push through,” Lambino said during a Palace press briefing.
“But since the excise tax will not increase starting January 1, instead of quadrupling the amount, we will double the amount. Instead of 15,000, it will be 110,000 Pantawid Pasada grant for 2019,” he said.
Lambino said the economic managers have already recommended to the Palace the suspension of the second tranche of the excise on oil products next year to curb the impact of soaring fuel prices.
He said the proposed fuel tax suspension could result in a revenue loss of 127 billion. He said the government initially estimated 141 billion in foregone revenues but could recover some amount from the additional value-added tax collection from high prices of oil products.
To compensate for the revenue losses, Lambino said the government was looking into possible budget cuts in non-essential spending such as travels and purchase of vehicles.
He noted that the Development Budget Coordination Committee (DBCC) has already created a tax force to study the possibility of postponing or cutting non-essential expenditure.