Alternative to fuel tax

The concern of the Duterte administration regarding moves in Congress to scrap the additional tax on fuel is understandable. More so if those leading the campaign are seeking reelection in the midterm polls in May 2019. Many are afraid that these gestures are politically motivated and intended to win public support for their election bids. No politician seeking an elective position will support any tax increase. On the other hand, politicians opposing a tax hike will naturally be favored by the ordinary consumer who is most affected by price increases (higher taxes usually mean higher prices, as these are passed on by manufacturers and traders).

Congressmen and senators should let President Duterte’s economic managers explain their recommendation to proceed with the scheduled fuel tax hike on Jan. 1, 2019, as provided in the Tax Reform for Acceleration and Inclusion or TRAIN Act, which their own Congress approved in 2017.

The first increase in fuel tax on Jan. 1 this year was, on hindsight, a case of bad timing. The prices of basic goods and services were creeping higher because of supply shortages, particularly of rice. Then oil prices also trekked higher, triggering spikes in the prices of electricity and transport as well as in the pump prices of petroleum products. All these caused inflation to spiral to its highest in more than nine years by October.

The scheduled fuel tax increase on Jan. 1, 2019, will be under a different economic scenario. Prices of imported oil have gone down sharply due to oversupply (which is forecast to persist until 2019), and inflation has started to normalize as the availability of essential items such as rice has improved.

Assuming current prices will hold, the additional P2 increase in the tax on gasoline and diesel on Jan. 1 next year will bring prices to P43.30-P52.96 a liter and P38.55-P43.44 a liter, respectively. These are lower than the prices in October of P50.15-P60.12 a liter of gasoline and P45.05-P50.29 a liter of diesel. These are also not too far from the preTRAIN price of P37.23 a liter of diesel and P49.90 a liter of gasoline in December 2017. With crude oil prices forecast to soften further, some more rollback in pump prices can be expected.

The government also needs the money. Suspending the tax hike in January 2019 is estimated to result in a net revenue loss of P43.4 billion for a 12-month period. This, in turn, will lead to a commensurate decrease in government expenditures for public services.

Some have pointed to the events happening in Paris, where the government was forced to cancel an impending fuel tax following widespread public demonstrations, but that situation seems different. The violent protests in France were triggered by general public dissatisfaction over French President Emmanuel Macron’s policies, which allegedly favor the affluent and has led to his being called the “president of the rich.”

Congress and the Duterte administration should strive to arrive at a workable solution that will balance the revenue interest of the government and the wellbeing of consumers, particularly the lower-income classes who suffer even with the slightest increase in prices of food and other essential goods and services.

This is made more pressing by the fact that the rate of increase in prices of basic commodities among poor families remained at an almost fiveyear high of 9.5 percent year-on-year last October. The Philippine Statistics Authority’s Consumer Price Index (CPI) for Bottom 30-Percent Income Households report for October showed that the year-onyear rate matched September’s similar 9.5 percent, the highest since 2014, based on 2000 prices.

In the absence of any plausible alternative or alternatives to the fuel tax increase, the executive and legislative branches of government should instead focus on implementing mitigating measures or financial aid already promised to the public in the TRAIN Act, and let the tax increase push through as mandated by law. In the meantime, politicking should be kept out of discussions on the pros and cons of the fuel tax hike.

CONGRESS AND THE DUTERTE ADMINISTRATION SHOULD STRIVE TO ARRIVE AT A WORKABLE SOLUTION THAT WILL BALANCE THE REVENUE INTEREST OF THE GOVERNMENT AND THE WELLBEING OF CONSUMERS