‘It’s a go’ for fuel excise tax hike

By December 5, 2018Property News

A FRESH INCREASE in fuel excise tax will proceed as scheduled next month after President Rodrigo R. Duterte approved in a Cabinet meeting on Tuesday night his economic managers’ recommendation to scrap his order barely three weeks ago to suspend the hike, the state Budget chief told reporters.
“It’s a go,” Budget Secretary Benjamin E. Diokno said in a mobile phone message when asked for an update as the Cabinet meeting was under way.
“He (Mr. Duterte) is simply implementing the TRAIN law,” he explained, referring to Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion Act (TRAIN) that took effect last January.
Presidential Spokesperson Salvador S. Panelo separately confirmed the move in a text message.
TRAIN, among other major adjustments to the local tax structure, imposed a P6 per liter fuel tax spread out through three years, with the first tranche of P2.50/liter imposed last January, a P2/liter increase set in 2019 and P1.5/liter for 2020.
It had also set a $80 per barrel (/bbl) average price for three straight months as a trigger for automatic suspension of a scheduled tax increase.
“The President and the Cabinet approved the implementation of the law,” Mr. Diokno told reporters, citing ” [t]he sharp turnaround in world crude prices” from above $80/bbl between Sept. 26 and Oct. 14 ” to P68/bbl on Nov. 29, with Dubai futures prices projecting further decline below $60/bbl in 2019” .
“Even with the second tranche (of fuel price hike), oil product prices will be P10/liter lower than their peak sometime in October,” he added, citing official projections that diesel price at the pump willl be P37.76/liter on Jan. 19 — ” inclusive of the P2/liter excise tax” — from a P49.80/liter peak, while gasoline will be P50.82/liter on the same future date from a P60.90/liter peak.
Mr. Diokno also cited P43.4 billion in revenues to be foregone from suspension of the scheduled tax increase.
Earlier in the day, the Department of Energy (DoE) said it expected world crude prices to be at the ” low $50s” per barrel next year, prompting the agency to support state economic managers’ proposal last week to scrap Malacañang’s decision to suspend an excise tax hike on fuel that was scheduled for next month.
“We are seeing the Dubai crude oil at around the low $50s in the coming months,” Energy Secretary Alfonso G. Cusi told reporters on the sidelines of the Energy Investment Forum 2018 at the Shangri-La at the Fort in Taguig City on Tuesday.
“We have submitted our position already. We submitted our forecast and it shows there that the forecast will be somewhere in the low $50 and that supports the recommendation of the DBM (Department of Budget and Management) and the DoF (Department of Finance) to reinstate the excise tax [hike] because… we really need to build our infrastructure and we need the fund, we need the money,” he added.
Mr. Cusi said other developments in the international oil market could also result in more supply. He said news that Qatar would be leaving the Organization of the Petroleum Exporting Countries (OPEC) could mean the Middle Eastern country would be acting independently.
“Hopefully, that would increase their production and increase in the supply in the world market,” he added.
“The law of supply and demand: if there will be more supply then the price will go down.”
Mr. Cusi also downplayed the threat of a production cutback by OPEC major Saudi Arabia and Russia.
“As of now, the forecast is, something like, the world supply is something like 100 million barrels a day and the demand is somewhere at the low 90s, 98-99 [million barrels]. So there is that buffer and it is projected that the US will be increasing its production,” he said.
“So if the US will be able to cover for the reduction in the production of Saudi and Russia, then we’re okay,” he added.
“Next week, we’re going to see hopefully another rollback.”
This week, oil companies cut the prices of petroleum products by P2.00 per liter for gasoline, P2.10 per liter for diesel and P2.00 per liter for kerosene. This week’s reduction is the eighth straight week of price cut for local oil companies at amounts mostly higher than P1.00-P2.00 per liter. — Victor V. Saulon with inputs from A. L. Balinbin