DBM still hopeful on fuel tax hike in 2019

The Department of Budget and Management is still hopeful of seeing the next round of fuel excise tax increase scheduled for 2019 implemented, as the DBM chief said that oil prices in the global market are expected to ease in the coming months.

At a press briefing, Budget Secretary Benjamin Diokno said the next scheduled increase may not need to be suspended for the whole of 2019 as the price of Dubai crude is expected to decline below the $80 per barrel level.

“I don’t think it will, because as we forecasted, the price of oil will really taper off from here on,” Diokno told reporters when asked if the fuel excise suspension would stay for the entire 2019.

“After the winter months, it will gradually taper off. So with the tapering off, it will be much lower than $80 per barrel,” he added.

By then, Diokno said the government may be able to proceed with the P2 per liter additional excise tax on diesel products.

The budget chief said the suspension would be implemented once President Duterte issues an executive order. Accordingly, he said lifting of the suspension would require another EO.

The government’s economic team earlier recommended to the President the suspension of the next increase in fuel excise tax in January 2019 to ease inflationary pressures amid rising global oil prices.

Under the Tax Reform For Acceleration and Inclusion (TRAIN) law, excise tax on fuel was raised by P2.50 per liter effective Jan. 1, 2018. This is scheduled to increase by another P2 per liter on Jan. 1 next year, and P1.50 per liter in 2020.

The tax has been blamed for galloping inflation.

The TRAIN law also provides that the next increase should be suspended if Dubai crude oil price averages at least $80 per barrel, based on the Mean of Platts Singapore, in three months preceding the scheduled increase.

Earlier, the Department of Finance said the proposed suspension of the excise tax hike is estimated to result in a net loss of P27 billion if implemented for a whole year.

It said that while there would be P41 billion in foregone revenues from the suspension, the government may still recover P14 billion in additional value-added tax collections due to higher oil prices.

The Bangko Sentral ng Pilipinas, for its part, said a full-year suspension would likely result in a 0.2 percentage point reduction in inflation.