DOF: No suspension of excise tax on fuel

MANILA, Philippines — Despite consumers’ cries of desperation and demand for relief, the government cannot just suspend a provision in the Tax Reform for Acceleration and Inclusion (TRAIN) law that is widely blamed for the spike in the prices of basic goods, especially fuel.

The Department of Finance (DOF) made this clear yesterday as it cited a mechanism in the TRAIN law that allows the suspension of the increase in fuel excise tax when Dubai crude oil price based on the Means of Platts Singapore (MOPS) averages $80 per barrel for three consecutive months preceding the next scheduled increase.

“The DOF does not have any plans on immediately suspending the increased rate of excise taxes on petroleum products for 2018 as this is not the mechanism sanctioned by law,” Finance Undersecretary Karl Kendrick Chua said. The TRAIN law was implemented last January.

In line with this, Chua said the DOF and the Department of Energy (DOE) are closely monitoring the prices of petroleum products.

“Should the price of Dubai crude keep going up and the three-month average in the last quarter of this year hits $80 per barrel, we will be ready to activate the suspension mechanism for the next increase in January 2019,” the DOF official said.

According to Chua, the TRAIN law also provides measures to protect the public from the rising prices of oil products. He said this comes in the form of social grants, such as the unconditional cash transfer and fuel vouchers.

For this year, some P24 billion will be released to cover the poorest 10 million households under the unconditional cash transfer program.

In addition, he said the DOE and major petroleum companies, such as Pilipinas Shell, Phoenix Petroleum and Petron, agreed last March to provide fuel discounts to public utility vehicle drivers. The Department of Transportation (DOTr) is preparing the fuel vouchers for duly franchised PUVs, Chua added.

“The DOF is working closely with the lead implementing agencies of projects related to TRAIN to ensure that the mitigating measures will be delivered to the people at the soonest possible time while ensuring the least leakage,” he said.

Chua said the Department of Trade and Industry (DTI) is also monitoring and regulating prices of commodities in the market to prevent businesses from resorting to overpricing and profiteering.

He said the DTI has established e-Presyo, an online price monitoring system where the public can check the prevailing prices of basic necessities and commodities that are being monitored by the DTI.

Finance spokesperson Paola Alvarez said under the TRAIN law, the suspension could only happen in the next tranche of increase in the excise tax of oil, which will happen in January next year.

“It will be the next tranche in 2019 that we will suspend and it’s also hard for us to suspend, mid-year, because you have already projected in your appropriations, in your revenues and in your budget, those things that you will fund and your budget allocations are also set in place,” Alvarez said in a press briefing at Malacañang.

Alvarez said economic managers convened under the Development Budget Coordination Committee (DBCC) also have to recommend a suspension of the fuel tax provision before it can be implemented.

The DBCC is composed of representatives from the National Economic and Development Authority, finance and budget departments and the Bangko Sentral ng Pilipinas.

“The crucial thing here is we cannot just suspend it because we want to fund free (tuition in) state universities. We want to increase the salary of our personnel, our teachers, everyone,” Alvarez said. “We will have a hard time funding them if we suspend the provisions mentioned.”

Presidential spokesman Harry Roque also voiced opposition to suspending the TRAIN provision on excise tax. He admitted that the implementation of TRAIN is “painful” but necessary to bankroll government programs.

“We have been giving more money in people’s pocket. So how do we explain this? For example, when we lower the personal income tax, we actually gave money to the people for them to spend; when we gave unconditional cash transfers, we also increase the spending power of the people,” Alvarez said. 

“We are going to give free education, that will also contribute to inflation, because once you give more money in the market, right now people instead of saving, they actually spend,” she added.

Asked how the government intends to help the lower middle class who are not beneficiaries of cash transfer programs, Alvarez replied: “The middle class benefited from the lower income tax.” 

New briefing

Concerns over rising prices as well as apparent confusion over the implementation of the TRAIN law should be discussed among lawmakers and economic managers, Senate President Vicente Sotto III said.

Sotto said he personally asked Finance Secretary Carlos Dominguez III last Wednesday to again brief senators on TRAIN and its impact.

“The best thing to do is to study the situation well instead of taking the issue that way,” Sotto told reporters, referring to calls to amend the TRAIN or immediately suspend its excise tax on fuel provisions.

He said based on what he had read about the explanations of economic managers, external factors and not TRAIN triggered the surge in the prices of commodities.

Sen. Panfilo Lacson, who did not vote for the TRAIN bill, said it was easy and popular to call for a suspension of the law but there must be immediate solutions to compensate for the revenue losses.

He said he would push for the reduction of the 12 percent value-added tax as well as the elimination of some unnecessary tax exemptions.

He warned of possible civil unrest if the prices of basic commodities continue to rise.

“When the stomach protests, prepare for revolution… I’m not encouraging it, but it’s a fact of life, a political reality,” Lacson said. “Let’s find ways to arrest the situation.”

Militant groups under the Bagong Alyansang Makabayan picketed outside Congress to demand the suspension or scrapping of the TRAIN law.

“We welcome all initiatives to scrap or suspend the TRAIN law in order to give immediate relief to consumers. We also support calls for a minimum wage for workers,” Bayan secretary-general Renato Reyes said.

Don’t look at us

As lawmakers are being castigated for the passage of the TRAIN law, the chairman of the House committee on ways and means said the law is the DOF’s brainchild, not Congress.

“This law, right from the start, was the proposal of the finance department. It was the DOF that submitted the draft to the House and the Senate,” Quirino Rep. Dax Cua clarified.

“We (lawmakers) just improved it in the course of our debates and deliberations. There were some improvements that were introduced by congressmen and senators,” he told dzBB in an interview.

“It was really the DOF that studied and strategized the enactment of the TRAIN law,” Cua explained.

He said he is open to proposals to suspend some provisions of the law, especially the one imposing excise tax on fuel products.

For his part, Magdalo party-list Rep. Gary Alejano reiterated his call for the immediate review of the TRAIN law under Republic Act 10963.

“We saw a big-time oil price hike last week which is the biggest soar this year so far. It is expected that this would continue with Department of Energy warning the public of possible hikes in the coming weeks,” he said.

“Given this scenario, it is urgent that we review TRAIN and if necessary suspend the implementation of the excise tax,” the former Marine captain stressed. 

He also suggested that deliberation on the second package of TRAIN be held off for the time being.

“We have yet to assess the impact of the first package. We cannot rush into the second one as this may complicate the present situation. Let’s resolve first the existing questions and issues before proceeding with the implementation of the second package,” he said.

“What must be done now is to address the problems and stop denying that TRAIN contributed to the crisis. If the government will keep on defending TRAIN, it will not be able to see the realities Filipino families are facing now under the Duterte tax plan,” he said.

Meanwhile, the Department of Agriculture (DA) is eyeing the revival of the Marcos-era Kadiwa market system to help consumers buy cheaper basic goods.

In a students’ forum Monday, Agriculture Secretary Emmanuel Piñol acknowledged that the rice industry is one of the sectors somehow monopolized by businesses.

“This is the only industry where traders earn more than farmers,” Piñol said in Filipino, adding that traders also control market prices.

Piñol said this prompted the National Food Authority  (NFA) to launch the Tulong sa Bayan project.

The project, however, was implemented while the NFA was not under the DA.

“But now that the NFA has returned to the DA, we are now trying to revive the Kadiwa stores where consumers can buy cheaper products,” Piñol said. – With Alexis Romero, Delon Porcalla, Paolo Romero, Rhodina Villanueva, Catherine Talavera