A consumer group is asking the government to stop the collection of excise tax on oil products to give relief to consumers, who have been hit hard by the pandemic. But the National Economic and Development Authority disagrees saying the suspension of excise tax is unnecessary as the projected oil price hikes that take effect midnight tomorrow have already been factored by the Bangko Sentral in its inflation target.
A proposal by a consumer group for the government to suspend the excise tax on petroleum products—with oil companies announcing another round of price hikes effective midnight tonight—was opposed by the National Economic and Development Authority saying this (move) is still unnecessary as the projected oil price hikes have already been factored in the inflation projection.
But the Laban Konsyumer, headed by Victorio Mario Dimagiba, said suspending the excise tax will provide relief to many sectors amid the pandemic. Besides suspending the excise tax is in line wit6h Presidential Proclamation 1218, which allows the national government to monitor and control prices of necessities and prime commodities.
In invoking Proclamation 1218, Dimagiba said the President can by executive order suspend excise taxes on fuel products for a limited period, every two weeks interval and this will be a big help to consumers across all sectors.
He said suspending excise taxes of P10 for gasoline, P6 for diesel and kerosene and P3 for liquified petroleum gas is a “big assistance to mitigate unavoidable pass on costs of goods and services to all sectors.”
He noted that the year-to-date retail prices of gasoline, diesel and kerosene are currently at P16.55, P15 and P12.70, respectively.
The excise tax regime is based on the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) previously, which mandates increasing rates from 2018 to 2020.
$80 a barrel
The TRAIN law allowed for suspending the scheduled increase when the average Dubai crude oil based on Mean of Platts Singapore reaches at least $80 per barrel.
Laban Konsyumer also proposed to conduct tax investigation of all oil companies for windfall profits to assess tax compliance.
Not necessary
With oil prices hitting $80 per barrel, suspending provisions of the TRAIN Law may not be necessary to keep inflation at bay, NEDA Secretary Karl Kendrick Chua said.
Chua is the architect of the Duterte administration’s tax reform program in his previous post as undersecretary for Finance. He said inflation is still within the Bangko Sentral ng Pilipinas targets, and resorting to suspending TRAIN provisions would not be necessary at this time.
The recent spike in oil prices in the international market, Chua said, has already been factored into the BSP forecast of 4.4 percent this year “with risks tilted to the upside, including risks on high oil prices.”
“No, since [we are] within target. Remember we have an annual program. We base it on that, not on a single data point,” Chua told Business Mirror on Monday.
Chua added that based on CME futures market as of October 11, 2021, Dubai crude oil prices are expected to settle at $78.2 per barrel by December from $79.8 per barrel in October.
“Should actual oil prices for November and December 2021 settle based on CME futures, the 2021 average Dubai prices would average at $69.3/bbl. This is still within the DBCC [Development Budget Coordination Committee] assumption, although at the high end,” Chua said.
Suspension is on annual basis
Finance Secretary Carlos G. Dominguez III said while the DOF can suspend the TRAIN, this only pertained to annual increases in the tax rates, and only if Dubai Crude exceeded $80 per barrel.
Dominguez said, the DOF will check the revenue impact if the suspension can be done. “Under the TRAIN, what was allowed to be suspended, upon recommendation of the DOF, was the annual increases of rates— which ended in 2020 —and only if the MOPS for Dubai Crude in the last three months exceeded 80 per barrel.”
‘Little effect’
DOF Undersecretary and Chief Economist Gil Beltran said that while suspending provisions of the TRAIN Law may have legal consequences that he may not be familiar with, this may only have “little” effect on inflation.
This “little” effect, Beltran said, only takes into consideration the fact that the country is a net oil importer, since it cannot shift to a substitute product.
This effect also considers the impact on the tax that the government may have to give up with the suspension of TRAIN Law provisions.
‘Won’t last long’
“On the positive side, the high price of petrol won’t last long. Futures prices expect a return to USD60 per barrel as soon as [the] market normalizes,” Beltran said.
DOF data showed the government collected P299.27 billion from its fuel marking program, which became mandatory under the TRAIN law.
This comprised of P269.49 billion in duties and taxes were collected by the Bureau of Customs from oil imports as of October 7 this year
This is broken down into P107.77 billion collected in 2019; P147.44 billion in 2020; and P14.28 billion in 2021.
DOF data also showed the Bureau of Internal Revenue collected P29.78 billion from excise taxes between December 2019 and July 22 this year —broken down into P18.77 billion collected in 2019 and P11.007 billion in 2020. No data on excise taxes are available for 2021.
The government has marked a total of 30.54 billion liters between September 2019 and October 8 this year.
This is composed of 12.05 billion liters marked in 2019; 17.086 billion liters in 2020; and 1.41 billion liters in 2021.
Another price hike
Oil companies have announced they would raise gasoline prices by P1.30 per liter, diesel by P1.50 per liter and kerosene by P1.45 per liter. The hikes are due to insufficient supply of crude oil versus demand.
This week’s oil price hike will result in the year-to-date adjustments standing at a total net increase of P17.85 per liter for gasoline, P16.50/liter for diesel and P14.19 a liter for kerosene.
Oil firms, which adjust prices every week, said the price adjustment reflects movements in the world oil market.
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