The Tax Reform for Acceleration and Inclusion (TRAIN) Law allows the suspension of fuel excise tax increases but only under specific conditions, the Department of Finance (DOF) said as it stressed that the government has an array of measures to mitigate the effect of rising oil prices triggered by the escalating cost of petroleum in the world market.
Finance Undersecretary Karl Kendrick Chua assured the public that social mitigation measures are in place to ease the impact on vulnerable sectors of fuel pump price increases, which are mainly the result of rising crude oil prices in the world market and not of the TRAIN Law.
Chua said “the DOF does not have any plans on immediately suspending the increased rates of excise taxes on petroleum products for 2018 as this is not the mechanism sanctioned by law.”
“The suspension measure only takes effect when the average Dubai crude oil price based on Mean of Platts Singapore (MOPS) for three months preceding the scheduled increase reaches or exceeds US$80 per barrel,” Chua said in response to calls for the suspension of the petroleum excise tax increase.
“As the global price of oil has unexpectedly increased, the DOF and the Department of Energy (DOE) are closely monitoring the price of petroleum products in the Philippines,” Chua said.
“Should the price of Dubai crude keep going up and the three-month average in the last quarter of this year hits 80 dollars per barrel, we will be ready to activate the suspension mechanism for the next increase in January 2019,” he said.
According to Chua, the most important thing is that the public is protected by way of mitigating measures such as social grants in the form of the Unconditional Cash Transfer (UCT) and fuel vouchers.
The Department of Social Welfare and Development (DSWD) has so far released some P4.3 billion to the Land Bank of the Philippines for some 1.8 million Pantawid Pamilyang Pilipino Program (4Ps) beneficiaries with existing LandBank cash cards. Another 2.6 million household beneficiaries are in the process of getting their cash subsidies in May and June. For 2018, some P24 billion will be released to cover the poorest 10 million households.
For this year, UCT beneficiaries will receive P200 a month, which will increase to P300 a month in 2019 and 2020, Chua said.
In addition, the DOE and major petroleum companies such as Pilipinas Shell, Phoenix Petroleum and Petron agreed last March to provide fuel discounts for public utility vehicles (PUV) drivers, while DOTR is preparing the fuel vouchers for duly-franchised PUVs, Chua said.
“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 actively monitoring and regulating prices of commodities in the market to prevent businesses from resorting to overpricing and profiteering.
He said the DTI has put in place the e-Presyo, an Online Price Monitoring System (OPMS), where people can “check the prevailing prices of basic necessities and prime commodities that are being monitored by the DTI. It serves as a price guide for consumers in doing their grocery shopping which in turn ensures ‘value for money.’”
The pertinent provision of the TRAIN on the suspension of fuel excise taxes states the following:
“For the period covering 2018 to 2020, the scheduled increase in the excise tax on fuel as imposed in this Section shall be suspended when the average Dubai crude oil price based on Mean of Platts Singapore (MOPS) for three (3) months prior to the scheduled increase of the month reaches or exceeds Eighty dollars (USD 80) per barrel.”
The mechanism and conditions to carry this out is likewise stated in this law:
“Provided, that the Department of Finance shall perform an annual review of the implementation of the excise tax on fuel and shall, based on projections provided and recommendations of the Development Budget Coordination Committee, as reconciled from the conditions as provided above, recommend the implementation or suspension of the excise tax on fuel: Provided, further, That the recommendation shall be given on a yearly basis: Provided, finally, That any suspension of the increase in excise tax shall not result in any reduction of the excise tax being imposed at the time of the suspension.”
Earlier, Chua said a spike in rice prices because of alleged lack of supply, a weak peso, rising oil prices abroad, better tax compliance of local cigarettes, and growing consumer demand accounted for the bulk of the 4.5 percent inflation in April.
“Inflation rose mainly because of local and global factors. TRAIN accounted for only 0.4 percentage points of the 4.5 percent. In other words, if you could buy items for P100 last year, you need to spend P104.50 now for them and of that increase, only 0.40 (forty centavos) was due to TRAIN,” said Chua.
Oil prices abroad rose because of unexpected geopolitical and global economic factors affecting supply that are beyond the Duterte administration’s control, such as lower production from Venezuela, the potential US sanctions on Iranian oil exports, voluntary output cuts by Russia and theOrganization of the Petroleum Exporting Countries (OPEC) cartel, he said.
The additional excise tax on oil and oil products arising from the TRAIN accounted for only 0.2 percentage points, he said.