Fuel tax hike suspended, but current tax stays

MANILA, Philippines — President Duterte has approved the recommendation of economic managers to suspend the P2 increase in fuel excise tax in January 2019 to anchor inflationary expectations.

Malacañang announced the approval yesterday in a memorandum signed by Executive Secretary Salvador Medialdea, addressed to Finance Secretary Carlos Dominguez III, Budget Secretary Benjamin Diokno and Socioeconomic Planning Secretary Ernesto Pernia.

The current fuel excise tax of about P2.50 per liter, imposed since the start of the year and blamed by various sectors for high inflation, will remain in place.

“Please be informed of the approval of your recommendation to suspend the next scheduled increase in the excise tax on fuel, subject to Section 43 of Republic Act 10963 or the Tax Reform for Acceleration and Inclusion Law,” the memorandum read.

Diokno, for his part, said Medialdea informed him of the approval in a letter sent on Tuesday.

However, Diokno said in his weekly press briefing that he was not informed yet if the implementation of the suspension would be put into action through the issuance of an executive order or a memorandum circular.

Diokno said the suspension will be subject to a review every quarter.

The budget chief reiterated that the planned excise hike suspension is estimated to result in a net loss of P26 billion if implemented for a whole year.

“That’s the maximum. It can be much lower than that (if), for example, after a quarter review we can take it back,” Diokno said.

Under the TRAIN law, excise tax on fuel was raised by P2.50 per liter effective Jan. 1, 2018. This is scheduled to increase by another P2 per liter on Jan. 1 next year and P1.50 per liter by 2020.

The law also provides that the next increase should be suspended if Dubai crude averages at least $80 per barrel, based on the Mean of Platts Singapore, in three months preceding the scheduled increase.

Economic managers have recommended to defer the next tranche of fuel excise tax hike scheduled next year due to inflation.

Earlier, the Bangko Sentral ng Pilipinas (BSP) said the suspension will likely result in a 0.2 percentage point reduction in inflation should it be implemented for the whole of 2019.

The impact will be correspondingly lower should it take effect for only a few months.

Business groups welcomed Malacañang’s decision, saying it will be beneficial to enterprises and the public.

“MAP (Management Association of the Philippines) supports the move of the government… as this would alleviate any further pressure on inflation,” MAP president Ramoncito Fernandez said in a telephone interview yesterday.

For his part, Sergio Ortiz-Luis Jr., honorary chairman and treasurer of the Philippine Chamber of Commerce and Industry (PCCI), said the country’s largest business organization considers the decision to suspend the fuel excise tax set for next year still a welcome development even if the group is of the view the government should have made the move earlier.

“We actually suggested it. We would have wanted it to be implemented at the height of high fuel prices. Prices are going down now so it may seem anticlimactic,” he said.

Still, he said the move is expected to benefit business and consumers.

The PCCI earlier gave a position paper to the government supporting calls to suspend the fuel excise tax under the tax reform program amid high prices. – With Louella Desiderio