Senators see relief from inflation, but cite oil-related risks

SENATORS see some relief for consumers as inf lation slowed down to 5.1 percent in December, but said authorities must stay on guard to protect the buying public from profiteers and sustain antiinflation measures, while remaining flexible to quickly tamp down risks especially from the impact of second-round fuel excise taxes.

One of them, Sen. Joseph Victor G. Ejercito, said that, to ensure there’s no going back to the 2018 price spikes, it would be wiser to forgo implementation of the second-round excise taxes on petroleum products.

However, Sen. Sherwin T. Gatchalian, chairman of the Senate Economic Affairs Committee, said suspension at this point is no longer an option since the second-round excise taxes on petroleum products already took effect on January 1.

Nonetheless, Gatchalian said on Sunday that he is open to another option to provide lawmakers and the Executive branch officials greater flexibility in case the world oil prices behave in an unpredictable fashion and there The price of oil per barrel for 2019 projected in the futures market, on which the DBCC based its decision in late November to reverse a recommendation to suspend the second-round excise fuel tax hike for this year. Under the TRAIN law, the higher excise taxes on petroleum may only be suspended once world oil prices hit $80 a barrel for three consecutive months

is need to blunt the impact of sudden spikes on the people.

He noted that the Tax Reform for Acceleration and Inclusion (TR AIN) law can be amended to take out the $80-a-barrel threshold required before any suspension of higher excise taxes can be resorted to.

Under the TRAIN law, global oil prices must hit $80 a barrel for three consecutive months before any such suspension is considered.

However, Gatchalian noted in a radio interview on Sunday that last year, by the time the world price hit $80, many sectors were already reeling from the impact of the global spikes, as these compounded the effect of higher excise tax on fuel as imposed by the TRAIN law effective on January 1, 2018.

Meanwhile, the Senate Ways and Means Committee chairman, Sen. Juan Edgardo M. Angara, said at the weekend that “slowing of inflation is welcome relief for the public after months of increasing prices.”

Angara added, however, that the Duterte government “must not let down its guard in monitoring unscrupulous sales practices and overpricing of food, gas, diesel and other basic commodities.”

At the same time, Ejercito also welcomed the “good news” even as he suggested that government seriously consider deferment of succeeding upward adjustments in oil excise tax rates.

“Medyo dahan-dahan nang naka adjust ang lahat. Kaya nga sana ipagpaliban na muna ang implementasyon ng second round ng excise taxes sa petrolyo [Everyone has slowly adjusted, that’s why I hope the second-round excise taxes on petroleum can be deferred],” Ejercito said.

Ejercito was referring to President Duterte’s decision at the year-end to uphold the stand of economic managers, who withdrew their earlier recommendation to suspend implementation of the next-round excise tax on oil, on the basis of Department of Energy projections that world oil taxes will remain low in 2019.

The Cabinet had earlier conceded that the unforeseen prolonged uptrend of global oil prices in 2018 had compounded the impact of the first-round excise rates on petroleum products under the TRAIN law, and was largely blamed for the record inflation last year. However, if no such sustained uptrend happens in global oil markets in 2019, the economic managers argued, there is thus no reason to go ahead with the earlier decision to suspend the second-round increases in excise for this year.

The Development Budget Coordination Committee made the decision in late November to recommend to the President the continued implementation of the scheduled increase of fuel excise tax in 2019 of P2 per liter under the TRAIN law. “With month-on-month inflation moderating due to supply-side reforms initiated by the government, coupled with falling petroleum prices in the world market, the DBCC deems the suspension unnecessary,” Finance Secretary Carlos G. Dominguez III had said.

The DBCC explained that Dubai crude oil prices have gone down by 14 percent, from an average of $79 per barrel in October down to $68 per barrel so far in November, adding that the futures market projects that the price of oil would decline further to below $60 per barrel in 2019 and maintain a downward trajectory.

Dominguez added that DBCC also considered the impact of the suspension of the increase in fuel excise taxes to the government’s revenues and expenditures program for 2019, with the suspension for one year causing an estimated net revenue loss of P43.4 billion assuming that Dubai crude oil prices averages $65 per barrel next year.

Under the TRAIN law, the excise tax on diesel imposed in 2018 is at P2.50 per liter, with an additional P2 to be imposed in 2019, and P1.50 per liter in 2020. This brings the excise tax on diesel to P4.50 per liter in 2019, and P6 per liter in 2020.

From the previous P4.35 per liter, excise tax on gasoline was increased to P7 this year, with an additional P2 increase in 2019 and P1 in 2020. For 2019 and 2020, the rates will be at P9 per liter and P10 per liter, respectively.

Inflation slows in December EARlIER, the BusinessMirror reported that rising commodity prices slowed to 5.1 percent in December 2018, the lowest since June 2018, citing the Philippine Statistics Authority (PSA).

This, even as the PSA noted that full-year inflation rose to 5.2 percent, the highest since 2009 when inflation averaged 4.2 percent.

According to National Statistician lisa Grace S. Bersales, the main cause for the slowdown in December inflation was cheaper food and transport costs. The higher full-year inflation was due to higher inflation, particularly in the second half of the year.

In December, lower prices of rice, meat, fish and vegetables caused inflation to slow. Data showed the inflation rate of rice slowed to 6 percent from 8.1 in November; meat, 5.5 percent from 6.3 percent; fish, 9.9 percent from 12.5; and vegetables, 8.1 percent from 11.5 percent. In terms of transport, prices of petroleum and fuels for personal transport equipment slowed to 4.2 percent in December 2018 from 19.8 percent in November 2018; jeepney fares, 5.4 percent from 11.6 percent; and domestic air fare, 2.1 percent from 6 percent.

The BusinessMirror report on the PSA update also noted data for fullyear 2018 inflation showed that the highest inflation was recorded in the second semester. Inflation peaked at 6.7 percent in September and October. PSA data showed that August inflation reached 6.4 percent, while November inflation reached 6 percent. For 2018, the highest inflation rate was recorded in the Autonomous Region in Muslim Mindanao at 7.1 percent, while the lowest was in Central luzon at 3.2 percent.