THE Development Budget Coordination Committee (DBCC) created on Tuesday a task force to assess items in the budget that can be postponed or cut if the President approves the suspension of the increase in oil excise taxes in 2019.
This was revealed by Finance Secretary Carlos G. Dominguez III during the DBCC news conference on October 16 at the Bangko Sentral ng Pilipinas (BSP) headquarters.
Dominguez said the task force would be composed of five members and led by Budget Secretary Benjamin E. Diokno.
Dominguez said the cuts would be to compensate for the estimated foregone revenues amounting to around P41 billion should the oil excise tax increase is temporarily suspended.
Diokno added that items in the budget they plan to cut with the DBCC is initially looking to include car purchases, as well as in maintenance and other operating expenditures by government agencies.
“Maybe calibrate the releases for the cars’ [purchases]. There is also a lump sum of the miscellaneous personnel benefits fund for the creation of positions. As of now there are still very few positions, so again that’s another item,” Diokno said during the news briefing. “And, of course, the maintenance and other operating expenditures, so there will be a seniority in the cuts.”
The task force would be the mirror image of the DBCC, according to Dominguez. The DBCC includes officials of the BSP, the Department of Budget and Management (DBM), the Department of Finance, the National Economic and Development Authority (Neda) and the Office of the President.
“We have created a task force to identify items that we may not release given the possible reduction in revenues,” Diokno added. “So there will be a seniority in expenditures; definitely the most senior would be the infrastructure projects.”
Dominguez explained that, in line with the revisions on the macroeconomic assumptions of the government on the prices of Dubai crude oil in the world market, the DBCC can now estimate the net effect on the government’s revenues should the oil excise tax increase under the Tax Reform for Acceleration and Inclusion (Train) law be suspended.
“However, the increase in price of fuel will also increase our take in the VAT [value-added tax], so we will estimate that now that we have the projections for the prices of fuel,” he said. “And a drop in the value of the peso also will increase our revenues from imports.”
Also on Tuesday, the DBCC adjusted its assumption for the price of Dubai crude oil, with the price per barrel expected to average $70 to $75 this year, coming from the previous assumption of $55 to $70 per barrel.
For 2019, the price range is projected to increase to $75 to $85 per barrel coming from $50 to $65. In 2020, this range is forecasted to drop to $70 to $80 and as low as $65 to $75 for 2021 and 2022.
In addition, the peso-to-dollar exchange rate is seen to likely average 52.5 to 53 against the greenback this year, coming from the previous 50- to 53-to-the dollar assumption. The range is adjusted to 52 to 55 for 2019 until 2022, up from 50 to 53 per the US dollar.
Under the Train law, excise tax on oil products will be gradually increased starting this year to 2020. The law, however, contains a provision for temporarily suspending the increase scheduled on January 1, 2019, if the average price of Dubai crude based on Mean of Platts Singapore exceeds $80 per barrel within a three-month period.
Furthermore, incremental excise tax increases were imposed on liquefied petroleum gas (LPG), diesel and gasoline products.
Tax on LPG, coming from a no-excise tax regime, would increase by P1 per liter this year, P2 next year and P3 in 2020. Diesel fuel would increase by P2.50 this year, P4.50 in 2019 and P6 in 2020. Regular and unleaded premium gasoline would have a tax increase of P7 this year, P9 in 2019 and P10 per liter in 2020. These increases come from an excise tax of P4.35 per liter in 2017.
A government multiagency is currently forming the implementing rules and regulations to clarify how the excise tax on oil will go about if ever it will be suspended. This group is composed of people from the DOF, the Bureau of Internal Revenue, Bureau of Customs and the Department of Energy, among others.