Gov’t may defer some infra projects
Amid higher fuel tax suspension
The national government may need to defer some infrastructure projects next year once the planned suspension of the higher excise tax on petroleum products is implemented next year, the Department of Finance (DOF) said.
Finance Secretary Carlos G. Dominguez III said yesterday that the government would lose 141 billion next year should the 12 per litter increase in fuel excise tax is suspended for a 12-month period. Dominguez, however, is optimistic the suspension would not be in place for the entire 2019, but at the same time expects higher collection from value-added tax (VAT) on petroleum would somehow offset the revenue losses.
“We will have to cancel some noninfrastructure expenditures,” Dominguez said, citing there are government projects and programs explicitly identified under the tax reform for acceleration and inclusion (TRAIN) law as beneficiaries.
“We consider social expenditures part of infrastructure. In fact, 30 percent of all collections under TRAIN goes to social infra expenditures, so if you want to cancel everything we will have to cancel a lot of infrastructure programs,” he added.
One of the possible projects that could be scrapped is the government’s free tertiary education, Dominguez said.
Under the TRAIN law, the next 12 increase in fuel tax, which is scheduled on January 1, 2019, will be suspended once the Dubai crude price averages above $80 per barrel in the final three months of this year.
“It’s not canceled, it’s temporarily suspended the increase of 12 per liter. In the first two weeks of October, it is already over $80 and the forward market the future market at the end of the year as of last week was over $80 dollars,” Dominguez said.
“The market is telling us it’s going to be over $80 dollars so we might as well announce the suspension so that people will not speculate anymore,” he added.
Dominguez, however, admitted that the TRAIN law is silent when the government could proceed with the increase in taxes once the price of fuel in world market has stabilized or dropped.
For this reason, Dominguez said the Duterte administration’s economic managers will discuss the mechanism and possible triggers for the reinstatement of the differed 12 per liter increase.
“We will do that in the next few days. But I suppose, this is not a final thing, but I suppose since three months is required I guess three months below $80 will also be required assumption. But it’s not in the law,” he said.
Dominguez also said that it is also unclear whether President Rodrigo R. Duterte needs to issue an executive order to govern the suspension or the DOF needs to come up with a revenue regulation order or new implementing rules and regulations.
He, meanwhile, assured the public that the suspension of the 12 additional excise taxes is a done deal even if the global oil prices dropped below the $80 threshold.
Dominguez said the suspension is President Duterte’s decision.
“There’s a chance [Dubai crude could drop] but I think it’s pretty slim that it will not average $80. If it’s $79, I think it’s is okay. We are not going to argue about $1. If it’s $70 that’s something else. But I doubt it will go down to that amount,” Dominguez.