Implementation of second fuel excise tax in January crushes hopes of a continued downward trend in oil prices
The series of rollbacks in fuel prices in the last quarter of this year is apparently too good to last. A wave of oil price hikes is expected next year as Budget Secretary Benjamin Diokno announced the approval by President Rodrigo Duterte of the next tranche of fuel excise tax and is expected to start in January 2019 despite an earlier announcement that its implementation would held in abeyance for the first quarter of 2019.
Since October, fuel prices have decreased almost every week, coming up to P10.55 for diesel and P11.85 for gasoline.
The approval of the implementation of the second tranche of the excise taxes on fuel prompt- ed transport groups in Cebu to brace for its impact while business leaders are mulling better mechanisms for a quicker suspension of the additional excise tax on fuel products.
Bus and minibus operators in Cebu province are hoping that the Land Transportation Franchising and Regulatory Board in Central Visayas (LTFRB-7) will approve their petition for increase in the minimum bus fare.
Julie Flores, chairperson of the Cebu Provincial Bus and Minibus Operators Transport Cooperative (CPBMBOC), said they have already lodged a petition to increase bus fares from the minimum P6 to P10, and P1.50 from P1.20 for each succeeding kilometer, last November.
“Apektado gyud tanan sectors ani. Labi na kami mga operators, owners sa bus ug minibus (All sectors are definitely affected by this. Especially us operators, owners of bus and mini-buses),” Flores added.
This could translate to a bus fare of P62 from P48 for a passenger riding at the Cebu South Bus Terminal (CSBT) to Carcar City, which is around 40 kilometers southeast of Cebu City.
“Our petition is now up to LTFRB to decide,” Flores said.
Under the Tax Reform for Acceleration and Inclusion (TRAIN) Act, an additional levy of P2.24 per liter will be imposed on diesel and gasoline starting January 1. The additional duty consists of P2 excise tax and 24 centavos value-added tax (VAT).
Diokno said this move was based on predictions that world crude prices would further go down in 2019.
Diokno explained that “he (Duterte) is simply implementing the TRAIN law. Even with the second tranche, oil product prices will be P10 lower than their peak sometime in October.”
He said the arguments that led to the approval were “the sharp turnaround in world crude prices. From a peak of close to $80 (per barrel) to $68pb in November 29, with Dubai Futures prices projecting further decline below $60 per barrel in 2019.”
“At its peak, diesel price was P49.80 per liter. It will be P37.76 in January ‘19, inclusive of the P2 excise tax,” Diokno said.
“For gasoline (95 Octane) it was P60.90 at its peak, it will be P50.82 in January inclusive of P2 additional excise tax. Second, the condition for suspension does not exist. Third, huge revenue loss estimated at P43.4 billion,” he added.
Could be wrong
But former House Deputy Speaker Erin Tañada said the country’s economic managers may be wrong again in their prediction of oil prices for 2019.
“Kung sinasabi po nila na ang projection ay hindi tataas ang presyo, eh nagkamali na sila noon. Pwede silang magkamali ulit ngayon,” he said during a press briefing in Quezon City.
(When they said their projection was that the price wouldn’t go up, they were wrong. They can be wrong again now.)
“Sabi nila hindi tataas ang inflation. Ngayon sinisingil sila sa sinabi nila na hindi pagtaas ng inflation. Ano’ng sinasabi nila? Wow, mali. Pwedeng ma-wow mali na naman sila rito,” he added.
(They said inflation wouldn’t rise. Now they’re being called to task for saying that inflation won’t rise. What are they saying? Wow, it’s wrong. They could be wrong again this time.)
Despite the recent strings of oil price rollbacks, Tañada said that this was not enough reason to continue with the implementation of excise taxes.
“Unang-una, hindi pa naman bumababa ang presyo ng bilihin,” he said.
“Ang importante dito, hintayin mo muna bumaba ‘yong presyo ng mga bilihin natin para hindi mahirapan ang ating mga mamamayan.”
(First of all, the prices of goods have not gone down. What’s important here is to wait for the prices of goods to go down so that our countrymen won’t suffer.)
“Ayokong gamitin na porket bumaba lang ang presyo ng langis ay pwede nang itaas ulit ang excise taxes,” he added. “Importante ang mga projection na ginagawa nila eh pag-aralan nang mas mabuti at mas mahaba dahil alam naman po natin ang problema no’ng 2018.”
(I don’t want to use the justification that just because the price of oil has gone down then we can again raise excise taxes. It’s important for them to study the projections they’re making more closely and longer, because we all know what problem we had in 2018.)
Cebu Chamber of Commerce and Industry (CCCI) President Antonio Chiu pointed out that oil is a product whose price can easily increase or reduce based on world market prices. Hence, the need for better means to suspend the additional excise tax on fuel products.
“They should shorten the observation period. They have to have legal basis to say that for this week or this month, we should suspend collecting excise tax. I just hope it is shorter,” he said.
Currently, under the TRAIN law, the excise tax on fuel can only be suspended when the global price of oil averages $80 dollars per barrel or higher within three consecutive months.
According to Diokno, the current oil price has gone down to 53 to 52 dollars per barrel hence the legal requirement for the suspension of excise tax on fuel cannot be met.
Chiu said this period should be shorter so that when global price of oil increases all of a sudden, the government can immediately suspend the excise tax to help consumers cope.
He said this can be done by an amendment signed by the Finance Secretary.
Cebu Business Club President Gordon Alan Joseph agreed with the need to put in place a quick mechanism.
“Or provisions should be made to cap the increase or to reduce the tax if oil prices increase,” Joseph suggested.
He added that while global oil prices may be at a downtrend now, this does not mean that it will not increase again in the coming months.
The Pinagkaisang Samahan ng mga Tsuper at Operators Nationwide (Piston) Cebu Chapter held a protest yesterday at Colon Street condemning the second round of fuel excise tax hike.
Greg Perez, Piston-Cebu coordinator, said it will cripple the ordinary jeepney drivers, and may even force some transport groups to seek a fare hike, similar to that of CPBMBOC.
Not only are they calling for the suspension of the excise tax, but also the abolition of the TRAIN law.
“Nya motaas ang gasolina, basin motaas ang plite. Ang luoy ra gyud aning TRAIN law kay ang ordinaryong tawo (The gasoline price will rise, the fare will rise. The poor people are the ones suffering with the TRAIN law),” said Perez.
Gasoline stations, like this one in Manila, started to ride on the TRAIN law by announcing increases in pump prices as a result of the new tax law.