Stick to the plan on fuel tax adjustments

THE Department of Finance (DoF) has shown reluctance to heed calls to suspend a scheduled increase in fuel excise taxes in January, suggesting the move will cost the government too much in lost revenue.

There is no legal basis at this time to suspend or modify the fuel tax, but the DoF’s outright dismissal of the possibility of suspending a tax increase scheduled for January is a bad message to send the public. It suggests the government is unwilling to follow the instructions it created for itself for responding to unexpectedly high oil prices.

there have been numerous calls to suspend or otherwise modify the government’s tax reform program, which is widely problem. The government has steadfastly refused to entertain these suggestions, and for the most part that has probably been the correct response. Changing a law that has only been in in effect for nine months would, indeed, be a drastic step and would likely have a negative impact on government spending and economic activity that might outweigh any

The same reasoning, however, applies in the case of the the Comprehensive Tax Reform Program (CTRP) established new, higher fuel excise taxes and a schedule for their annual increase. But as a protective measure, it also acknowledges the potential impact of world oil prices — something which is entirely beyond the government’s control — and contains a mechanism by which the scheduled increases can be suspended or delayed in case oil prices become too high.

As of now, the price threshold of $80 per barrel has been exceeded, and the prognosis is that oil prices will remain elevated for some time to come. Oil prices may, in fact, climb much higher in light of an announcement on Thursday by China, the second-largest petroleum export market for the US, that it was suspending oil imports from the US because of the ongoing trade war between the two countries.

The DoF on Thursday suggested that suspending the planned excise tax increase is a bad idea, however, because it could cost the government P40 billion in lost revenue. That context, but some dimension must be applied to it. P40 billion is the equivalent of just slightly more than 1 percent of the P3.757 trillion national budget for 2019, and a bit more than 0.9 percent of the country’s current foreign reserves.

While P40 billion is obviously a useful amount of money, it is not a critical amount; with some slight adjustments, its loss could be easily absorbed.

The value of establishing some consistency in following established laws and processes is, by comparison, incalculable. The CTRP is a well thought-out program, and at least one part of it is now the law of the land. Ignoring the established provisions for suspending a fuel tax increase will only damage the government’s credibility and set a bad precedent

The DoF must stick to the letter of the provisions that it energetically lobbied Congress to pass into law, and take the prescribed action to suspend the fuel excise tax increase that it might do otherwise only breeds uncertainty about the direction and management of government economic policy.

The possibility exists, however, that conditions in January when the decision will have to be made do not meet the law’s criteria, and the fuel tax increase will be implemented as planned. Just as the government should follow the prescribed process, so should everyone else.

By doing so, the tax reform program as conceived and implemented will have an unhindered chance to function, and any shortcomings it has will be clearly revealed so that