DOF: Inflation to remain high even if fuel excise tax suspended

MANILA, Philippines — Despite President Rodrigo Duterte's willingness to suspend the excise taxes on oil, there may be no immediate relief for consumers hit by rising prices of goods as the law only allows the suspension to be implemented next year.

Finance Assistant Secretary Tony Lambino said his agency would seek guidance on the pronouncement of the president, whom he said may be referring to the next tranche of increase in the excise taxes of oil.

"As far as I could tell, I interpreted the statement as being the next increase which is P2, the 2019 increase in the excise. And actually, there already is suspension mechanism in place in the TRAIN (Tax Reform for Acceleration and Inclusion) law for that to happen," Lambino said in a press briefing yesterday in Malacañang. 

"We are looking at all advice received regarding this area. We also need to look at all of the factors, the main factors involved in such a decision. So we looked to, of course, the Cabinet, our principals and, of course, the Office of the President for final guidance on this," he added. 

Under the TRAIN law, the next tranche of the fuel tax rate increase can be suspended if the three-month average of Dubai crude reaches $80 per barrel. The next round of increase will take effect in January next year. 

Duterte open to suspending fuel excise tax

On Tuesday, Duterte said he was open to suspending the excise taxes on oil, a move that activists and some lawmakers said would address the impact of soaring commodity prices. 

Senate Minority Leader Franklin Drilon previously said Duterte could ask lawmakers to issue a resolution that would allow him to suspend the excise taxes on petroleum products.  

But Lambino said legislative action is needed to implement an immediate suspension of the excise taxes.

"The excise tax rates are provided in the law. So if we suspend based on the mechanism that is in the TRAIN Law, then that can be automatic. But if we do something else, it would require different actions," the finance official said. 

Suspension of excise tax won't lower inflation

Lambino said inflation, which hit a record-high 6.7 percent in September, would remain high even if the excise taxes are suspended. 

"I think we also need to manage the expectations in that sense that if Congress decides to create a new suspension mechanism, the prices of oil would not go down that much because the import price has risen from about $40 per barrel to above $80 per barrel. The import price is something, unfortunately we do not control because we are not an oil producer. We are a price-taker," Lambino said. 

Lambino claimed that without the TRAIN law, the inflation would still hit 6 percent to 6.3 percent instead of 6.7 percent. He said the excises taxes on fuel only constitute 25 percent of the increase in fuel prices. 

"The 75 percent will be there whether there is TRAIN or not. The inflation will remain high," he said. 

"If you look at the food versus non-food analysis, food is accelerating while non-food is decelerating in terms of the inflation rate. So that’s why the economic development cluster prioritized immediate actions to bring down the prices of food by increasing supply." 

Lambino said the government would not be able to collect P40 billion in 2019 if the next tranche of increase in fuel excise taxes is suspended.