Tax expert still sees need to put off excise tax hikes

CEBU, Philippines — The government must proceed suspending another fuel excise tax hikes scheduled next year amid the falling global oil prices, a tax expert said yesterday.

Raymond Abrea, president of Asian Consulting Group, said the government should even "lift it temporarily until inflation goes down significantly to 4% or lower."

"Global oil prices may be going down, but inflation has yet to subside," Abrea told The FREEMAN yesterday.

"For September and October 2018, inflation remained at 6.7% and while it has remained stable, we need to remember that it is still a nine-year high record," the tax expert pointed out.

Last Friday, Malacañang said the recommendation of President Duterte’s economic managers to proceed with the second round of fuel excise tax hike in January is not yet final until the Cabinet approves it.

Abrea urged the government to put in place safeguards in case inflation soars again.

"There is still no law tying its suspension to inflation. Its suspension is still tied to the old TRAIN (Tax Reform for Acceleration and Inclusion) provision," he said.

Analysts are projecting inflation to slow down, but Abrea sees the need to be wary of kicking it back up.

"The excise tax will only be suspended if the global oil prices exceeded a certain amount. But by then, the prices will again be higher. Based on experience, we already know that the suspension mechanism imposed by TRAIN does not directly reflect the needs of the people. Remember, inflation had to reach a 6.7% before they decided to suspend its next tranche," he explained.

Finance Secretary Carlos Dominguez had said it would be "unnecessary" to suspend the excise tax increase with falling oil prices.

The economic team's recommendation was still set for discussion during today's Cabinet meeting.

The price of Dubai crude has fallen since the state economic managers recommended last October the suspension of further excise tax rises.

At that time, the price of the benchmark exceeded $80 per barrel, the threshold under the tax reform law that would require such suspension.

The Development Budget Coordination Committee had revised its assumption for Dubai crude in 2019 to $60 to $75 per barrel from $75 to $85.

The TRAIN law 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 for LPG, and P2.65 per liter for 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. (FREEMAN)