Senate to start hearings on TRAIN amendments

MANILA, Philippines — The Senate committee on economic affairs will start this week hearings on the impact on inflation of the proposed suspension of the excise taxes on fuel that is expected to pave the way for amendments to the Tax Reform for Acceleration and Inclusion (TRAIN) Law.

Sen. Sherwin Gatchalian, chairman of the committee, said the hearing on Wednesday aims to determine the impact of the suspension of excise taxes on diesel and gasoline ahead of the Department of Finance (DOF)’s full yearend review of the movement of world prices of oil per barrel as President Duterte committed to do so last week.

“We will study this and wait for the suspension (of excise taxes), and try to find out how long this should be… if there’s a need to fix the (suspension) mechanism (under the TRAIN Law) like pegging it to inflation,” Gatchalian told dzBB.

“We may peg it (average crude price) at $70 per barrel. Why wait until $80?” he said, referring to the price level triggering suspension.

Under the TRAIN, the next round of increases in excise taxes on fuel is suspended only if the price of Dubai crude breaches $80 per barrel on the average in the last three months prior to the scheduled tax hike.

In this case, it would be the average prices from October to December as the next round of increases in excise taxes under the law takes effect in January 2019.

The senator said any amendment to the TRAIN would require another law.

Members of the majority bloc wrote to Duterte two weeks ago asking him to suspend the next round of increases in excise taxes as inflation was already nearing seven percent. But TRAIN critics want a suspension or cut in the fuel tax imposed since January this year, without waiting for the $80 trigger.

According to the DOF, basic food items such as rice, fish, meat and vegetables have been major drivers of inflation this year, with the contribution of rice alone rising 10 times to one percentage point of the inflation rate. 

Data from the Philippine Statistics Agency showed that rice was the number one contributor to inflation in September 2018, and that food items in the consumption basket accounted for more than half of the inflation rate in the same month.

While VAT revenues accounted for a fifth of overall tax revenues, amounting to approximately P365 billion, Marcos said the national government has the capacity to absorb the VAT revenue loss given the rising tax revenues with the TRAIN Law.

Meanwhile,Ilocos Norte Gov. Imee Marcos said suspending the value added tax (VAT) on basic commodities – including food, fuel and electricity – for one year will benefit a wider number of Filipinos at a faster pace instead of waiting for the suspension of the second tranche of excise taxes next year.

“The suspension of the VAT would provide immediate relief to Filipino consumers. Given the magnitude of prevailing tax rates, the temporary suspension of the VAT on basic necessities would be immediately felt by millions of Filipino families,” Marcos said.