Lawmaker says suspension of fuel tax hike misleading

CLARK FREEPORT, Pampanga, Philippines  —  The government’s announced suspension of excise tax implementation next year is misleading, as what would be suspended is the tax increase of P4.50 per liter for diesel and P9 for gasoline and not the excise tax now in force under the Tax Reform for Acceleration and Inclusion (TRAIN) law, a party-list representative said yesterday.

“The government has neglected the already catastrophic socio-economic impact of TRAIN law’s first tranche excise tax on fuel,” Anakpawis party-list Rep. Ariel Casilao said in a statement.

“What the poor is demanding is the scrapping of regressive provisions of the TRAIN law, especially the excise tax on oil products that has triggered skyrocketing of prices, especially food items,” Casilao said.

Despite the government’s announcement of excise tax suspension next year, “the imposition of P2.50 excise tax per liter of diesel and P7 per liter of gasoline remains, and what was actually suspended was increasing it to P4.50 and P9, respectively,” he said.

Casilao noted that in 2010, about 1.3 billion liters of diesel were used for transport, and another 1.1 billion liters for machineries and equipment.

“Thus, imposing the excise tax would roughly add P6 billion to the costs of production,” he said.

“The added costs in production are obviously passed on to consumers via surged levels of prices. It is elementary to conclude we are facing unabated inflation to a large extent because of the first tranche of the TRAIN law imposition of excise tax, not the forthcoming second tranche next year,” he pointed out.

“The suspension of the second tranche is the administration’s very own admission of the calamitous impact of the TRAIN law in the country.  The implementation triggered broad people’s protest and condemnation, leading to the presidency’s dwindling trust ratings,” he said.

“The suspension of the excise tax imposition next year was actually a desperate measure. As we all know, the first quarter is very crucial when majority of the poor are totally drained of means of livelihood. Also historically, the people power protests were carried out on a February and January,” he added.

Congress OK needed

As some quarters insist that what should be suspended is the oil excise tax hike that took effect this year, a finance official said this would be possible only with Congress approval.

Finance Assistant Secretary Tony Lambino said TRAIN does not have a provision on the rollback of excise tax on oil products.

“There is no provision on the rollback of the current excise tax (on oil) that was implemented this year. So, that will need a congressional action,” Lambino said at a press briefing yesterday in Malacañang.

TRAIN, the first package of the government’s tax reform program, imposes new taxes on diesel, liquefied petroleum gas, kerosene and bunker fuel for electricity generation and higher taxes on other oil products. The excise taxes on oil products would be gradually increased until 2020.

The next round of oil excise tax hike is supposed to take effect on Jan. 1 next year. The law allows the temporary suspension of the increases if the average price of Dubai crude based on Mean of Platts Singapore reaches or exceeds $80 per barrel for three consecutive months.

While the condition provided by the law has not been met, President Duterte agreed this week to suspend the second round of increase to stabilize prices.

Economic managers have said crude prices are likely to stay above the $80 threshold over the next two months. 

But some senators believe the suspension should cover not just the next round of increase but any further hikes in excise taxes on fuel.

In a letter sent to the President last week, 17 senators from the majority bloc said the suspension of oil excise tax increases would lift the “heavy burden” carried by Filipinos affected by high commodity prices.

Asked if the next round of increase would be suspended even if average crude prices do not breach $80 per barrel over the next few months, Lambino said: “Well, if for instance a dollar (lower than the threshold), we do not need to discuss that. We will find a way.”

“But if it’s $60, $20 dollars below the threshold, which is close to impossible, we have to talk about it. But it’s unlikely that the threshold would not be exceeded,” he added.

Lambino said the possibility of a suspension not happening next year is very slim. He cited the huge demand from countries experiencing winter, the rift between Iran and the United States and the economic problems hounding Venezuela.

Finance officials previously said the government would not be able to collect about P40 billion next year if the next tranche of oil excise tax increase is suspended.

Lambino said the government would cut expenditures on non-infrastructure programs to offset the effect of the foregone revenues and to meet this year’s deficit target.

On the revenue side, Lambino said the government would continue to improve collection efforts and strengthen the campaign against smugglers and tax cheats.

Meanwhile, the National Democratic Front-North Eastern Mindanao Region (NDF-NEMR) said on Monday that the Duterte regime must answer for the alleged deliberate manipulation of the economy that has resulted in severe rice crisis and steep increases in the prices of goods.

“The regime shamelessly blames farmers for the soaring price of rice supposedly caused by elevated selling prices imposed by farmers on traders,” Maria Malaya, NDF spokesperson said in a statement posted on the group’s website.

“Almost half of the selling price of rice is pocketed by traders as profit. In fact, farmers are victims of high usury rates, lack of government subsidy, costly farm inputs and low prices of their products. Because of this, farmers, especially rice farmers, are constantly in a shortfall,” Malaya said. – with Alexis Romero, Jose Rodel Clapano