MANILA (2nd UPDATE) - The fuel excise tax increase in 2019 will proceed after getting the approval of President Rodrigo Duterte, officials confirmed Tuesday.
Duterte gave the green light during Tuesday’s Cabinet meeting. His economic team earlier suggested to push through with the hike, citing the lowering of oil prices in the world market.
In a statement, Presidential Spokesperson Salvador Panelo said the administration heavily considered the impact of suspending the fuel tax hike on the government’s infrastructure program and the budget for national government agencies.
“While the oil excise tax increase is a negligible contributor to inflation, we still commit to provide financial assistance to the 50% poorest households,” Panelo said.
Budget Secretary Benjamin Diokno said the condition for suspending the fuel tax hike would no longer be present, and that the government stands to lose about P43.4 billion in revenues if the suspension pushes through.
The price of Dubai crude has fallen since the economic team recommended last October the suspension of the fuel tax hike. At that time, the price of the benchmark exceeded $80 per barrel, the threshold under the tax reform law that will require such a suspension.
The Development Budget Coordination Committee has revised its assumption for Dubai crude in 2019 to $60 to $75 per barrel from $75 to $85.
Diokno, meanwhile, said Dubai crude oil futures project a further decline below $60 per barrel in 2019.
Diokno noted that diesel’s peak price in 2018 was P49.80 per liter and it will be P37.76 in Jan. 2019, inclusive of the P2 peso excise tax. For gasoline (95 octane) it was P60.90 at its peak, and it will be P50.82 in Jan. 2019, also inclusive of P2 additional excise tax, he said.
Presidential Spokesperson Salvador Panelo said Duterte granted the recommendation because of the reduced global oil price and its effect on the government's budget and infrastructure programs.
"If you suspend it then it will affect your budget, the personnel services of the national government. If you do that we will be losing P43 billion in revenues," Panelo told ANC.
"It will affect the entire services, budgets, infrastructure programs of the government and that will be bad for the people."
Panelo said it did not take the President long to decide on the matter.
"No, moreover you must notice the increase is minimal," he said.
The Tax Reform for Acceleration and Inclusion scheduled excise tax increases every year for 3 years starting Jan. 1, 2018, when duties were increased by P2.50 per liter for diesel, P1 per kilo of LPG, and P2.65 per liter of regular and unleaded gasoline.
TRAIN imposed excise taxes on diesel for the first time while the levy on regular and unleaded gasoline was raised to P7 from P4.35.
The economic team earlier recommended the suspension of the second tranche as inflation hovered at near 10-year highs. The price increases steadied at 6.7 percent in September and October.