Lift excise tax exemption: economic committee

Development Budget Coordination Committee recommends lifting of suspension of second tranche of increase in excise tax rates on fuel because crude prices in the world market went down

The Development Budget Coordination Committee (DBCC) has recommended the lifting of President Rodrigo Duterte’s earlier decision to suspend the second round of increase in fuel tax rates for 2019 under the Tax Reform for Acceleration and Inclusion (Train) Law.

In a statement on Thursday, Nov. 29, the DBCC recommended the continued implementation of the heftier excise duties on fuel amid the downtrend in price of crude in world markets.

“The recommendation comes in light of the favorable outlook in world oil prices, where the Dubai crude oil prices have gone down by 14 percent from an average of US $79 (P4,140.47) per barrel in October down to $68 (P3,563.95) per barrel so far in November,” the DBCC said.

“More so, the oil futures market projects the price of oil to decline further to below $60 per barrel in 2019, indicating a downward trend in world oil prices,” it added.

The recommendation came two weeks after Duterte approved the suspension of the scheduled increase of fuel tax rates of petroleum products in 2019, in a bid to tame the soaring prices of goods.

The DBCC is composed of the Department of Budget and Management, Department of Finance, National Economic and Development Authority and Bangko Sentral ng Pilipinas.

The panel said its proposal, subject to Duterte’s approval, would be discussed in a Cabinet meeting that will be held at Malacañang Palace on Dec. 4.

The Train Act slaps an additional excise tax of P1 on liquefied petroleum gas (LPG), P2.50 on diesel, P7 on gasoline and P3 on kerosene this year.

In 2019, the excise tax on LPG will go up to P2, diesel to P4.50, gasoline to P9 and kerosene to P4.

Under the Train Act, the second tranche of increases in fuel excise tax can be suspended when Dubai crude oil prices exceed the $80 per barrel threshold in the last three months of 2018, or prior to the scheduled increase of excise taxes on petroleum products.

The DBCC recommended the continued implementation of excise tax hike on fuel, noting that the possible suspension in 2019 would have an “adverse” impact on revenues and expenditures for the next fiscal year.

“The said measure is estimated to result to a net revenue loss of P43.4 billion for a 12-month suspension, assuming Dubai crude oil prices average $65 per barrel in 2019,” the committee stressed.

“The erosion in revenue will lead to a commensurate decrease in government expenditures so as not to breach the target deficit level of 3.2 percent of Gross Domestic Product in 2019,” the proposal read.

Following the latest developments in the declining world fuel prices, the DBCC revised its earlier projection on Dubai crude oil prices from $75 to $85 per barrel to $60 to $75 per barrel in 2019.

“The DBCC will also keep an eye on the trends of the world oil market,” it added.