DOF: Fuel tax suspension in 2019 stands despite lower crude prices

President Rodrigo Duterte’s economic team is sticking to its recommendation to suspend the second tranche of excise taxes on oil products next year despite the recent decline of global crude prices, an official of the Department of Finance (DOF) said Wednesday.

“That recommendation stands and it is an official document that we need to receive from the Office of the President in order to implement that recommendation,” Finance Assistant Secretary Tony Lambino said in a news conference in Malacañang.

Duterte has yet to come up with a decision on the recommendation even as Budget Secretary Benjamin Diokno said last week the suspension will only be temporary because of softening global oil prices.

Petroleum companies have recently implemented price rollbacks due to lower global oil prices.

Based on the monitoring of the Department of Energy for the trading period October 29-November 2, 2018, Dubai crude has decreased week-on-week by almost US$1.70 per barrel.

MOPS gasoline and diesel have also decreased per barrel by around US$2.60 and US$ 2.20, respectively.

The price rollbacks came weeks after the DOF announced that the second tranche of excise taxes on oil products will be temporarily suspended, in efforts to anchor inflation expectations.

Under the Tax Reform for Acceleration and Inclusion (TRAIN) Law, excise taxes on diesel fuel were hiked by P2.50 per liter this year, while excise taxes on gasoline were hiked by P7 per liter.

The law also provides that starting January 2019, excise taxes for diesel will be hiked by P4.50 and those of gasoline by P9 under the second tranche.

The increase, however, could be temporarily suspended should the average price of Dubai crude reach or exceed $80 per barrel for three months.

Lambino insisted that the recommendation was made because estimates of crude prices for November and December show that the average price will stay above the $80 threshold.

“Ang ginagawa po talaga natin ay tumutulong ng konti by making that recommendation,” he said.

“But at the same time ina-anchor po natin ‘yung inflation expectations para ‘yung behavior ng market, ‘yung behavior ng households, ‘yung behavior ng mga negosyo ay mas maging akma doon sa pag-stabilize ng mga presyo.”

Inflation remained steady at 6.7 percent in October, still a nine-year high since it clocked in at 7.2 percent in February 2009.