MANILA, Philippines — The energy department wants excise taxes on fuel suspended to rein in stubbornly high local pump prices, as the Duterte administration scrambles to fix what officials have repeatedly characterized as a “transitory” inflation surge.
Energy Secretary Alfonso Cusi floated the idea during an interview with ANC’s Headstart on Wednesday, saying that oil prices could go down by around P8 to P10 per liter if the collection of excise taxes is deferred.
“Can we suspend excise taxes? It’s easier said than done. Taxes collected are used to fund the national government’s operations and its pandemic response,” Cusi said.
“The government is currently studying how this can be implemented to arrest the increase of oil prices,” he added.
Indeed, such a plan could face major hurdles. For one, Cusi acknowledged that suspending excise taxes on oil would require legislative action because it was the Tax Reform for Acceleration and Inclusion (TRAIN) Act that mandated the collection of such levies.
At the same time, the suspension of excise taxes could deprive the cash-strapped government of much-needed revenues for its pandemic response. Finance Secretary Carlos Dominguez III did not respond to a request for comment as of reporting.
“Suspending the excise tax on fuel products is an important move to ease prices, but it does have repercussions on the government's tax revenue effort most especially at a time when it needs more revenues to keep the government running,” Ruben Carlo Asuncion, chief economist at Union Bank of the Philippines, said.
For Nicholas Mapa, senior economist at ING Bank in Manila, suspending the excise taxes on petroleum products could give consumers a reprieve from elevated inflation, which settled at 4.8% in September, well-above the Bangko Sentral ng Pilipinas’ 2-4% annual target.
But Mapa said the breather might not last long if global oil prices continue their rally. “If international oil prices continue to rise, we can see how quickly the relief can be wiped out. The only way we can hope to see domestic pump prices fall is if global oil prices fall as supply increases,” he explained.
That said, Cusi explained that the Department of Energy is also asking Congress to amend the Ramos-era Oil Deregulation law to allow the government to intervene on oil price spikes.
Central to this plan is the unbundling of the cost of retail petrol products, as it would empower the government to ask oil companies to detail the price breakdown of fuel sold per liter. According to Cusi, the DOE also wants amendments to the law to include a power for the agency to suspend excise taxes on oil, which he said must be “debated, deliberated, and discussed” to determine how this would be implemented.
“What we would like in the law, we want it to be part of the law, the authority to suspend it into certain abnormal conditions,” he said.