President Rodrigo Duterte is planning to suspend the second tranche of excise taxes on fuel to temper accelerating inflation, a Finance official said Sunday.
Finance Assistant Secretary Antonio Lambino II said Finance Secretary Carlos Dominguez III asked him to share with media a statement from Special Assistant to the President Christopher Go.
“As announced by SAP Bong Go, the President is making an early announcement of the temporary suspension of the January 2019 oil excise increase under the TRAIN Law. This announcement is being made two months before the time required by law, to proactively anchor inflation expectations and enhance the welfare of the Filipino people,” the statement said.
“After consulting the leadership of both the Senate and House of Representatives, as well as the economic team, the President is confident that this course of action will help anchor inflation expectations for the coming year, allow the public to manage their finances better, and disallow hoarders and profiteers from taking advantage of the situation,” it said.
Reports said Go announced the suspension in an event in Taguig City on Sunday.
Under the Tax Reform for Acceleration and Inclusion law, personal income taxes were slashed while excise taxes on fuel, tobacco, alcohol, and automobiles were increased.
In particular, the excise taxes on diesel fuel were increased by P2.50 per liter in 2018, while the excise taxes on gasoline were increased by P7 per liter. Aside from that, the law provides that beginning next year, excise taxes for diesel will be increased by P4.50 and gasoline by P9 under the second installment of the law.
Higher oil prices, together with faster increases in the prices of rice, meat, fish, and vegetable were the main reasons for the accelerating inflation that averaged 5 percent in the first nine months of the year.
Inflation in September further accelerated to a nine-year high of 6.7 percent from 6.4 percent in August. The average 5 percent inflation in January to September was well over the 2 percent to 4 percent target range earlier set by the Bangko Sentral ng Pilipinas.
Economic managers, however, earlier said inflation would slow down for the rest of the year on the back of the harvest season, as well as the expected better weather in the latter part of the year. They said inflation would return to the target range in 2019.
The faster-than-expected inflation prompted the Bangko Sentral ng Pilipinas to raise the benchmark interest rates by another 50 basis points to 4.5 percent during the last policy meeting on Sept. 27.
This brought the total interest rate hikes this year to 150 basis points. The BSP earlier increased the rates by 25 basis points each in May and June. It followed it up with a rare 50-basis-point hike in August.
Go on Sunday said the trigger price of $80 per barrel for three consecutive months must be met before the excise tax on oil can be suspended by January 2019.
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“I have heard that there is a resolution in the Senate asking for the suspension of excise tax increase due to high inflation. We are open for this, but we are considering what is included in the TRAIN [Tax Reform Acceleration and Inclusion] law,” said Go in a statement.
Go said there is a provision in the TRAIN law that suggests if the index selling price of oil in Dubai reaches at least $80 per barrel on the average of three consecutive months, the government may suspend the excise tax.
He also noted that a suspension of the excise tax would mean P40 billion in lost revenue for the government.
“Rest assured the President monitors the price of oil and other commodities to mitigate the effects of inflation and serve the Filipinos, especially the poor,” he said.
Go issued the clarification after he earlier announced the suspension on Sunday during the opening ceremony of TienDA Malasakit Store in Taguig City.
“The President and the Executive Department are now looking into the temporary suspension of the next increase of oil excise tax rates in 2019. This is scheduled to be imposed by January of next year as mandated by the TRAIN Law but to arrest the rising price of oil and its effects on the inflation rate we will defer implementing it until the right time,” Go said.
President Duterte on Tuesday announced he may suspend excise taxes on oil and petroleum products and said Finance Secretary Carlos Dominguez has been studying the proposal.
Senate President Vicente Sotto III said the President had sent a letter to majority senators on the possible suspension of the excise tax.
Minority bloc senators have also issued a resolution calling for a temporary halt to the imposition of the excise tax on petroleum products.
Senate Majority Leader Migz Zubiri said the excise tax was discussed during their meeting with the President in Malacanang Monday last week.
At the time, he said, Dominguez asked the senators to formalize the proposal in a letter.
The senators cited a recent report issued by the Department of Energy that oil traders at the S&P Global Platts Asia Pacific Petroleum Conference in Singapore predicted that crude oil could go to over $100 per barrel in the coming year.
“Such a projection is a grave concern, given the high oil prices and spiraling inflation threaten the country’s continuous economic growth,” the majority senators said.
Minority senators welcome statements from the Palace expressing openness to a suspension of the excise tax.
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