THE Department of Finance (DOF) said the government may have to cancel some infrastructure expenditures if the increase in fuel excise tax is suspended to compensate for the estimated forgone revenues of P40 billion.
According to Finance Secretary Carlos G. Dominguez III, one of the topics that will be discussed during the Development Budget Coordination Committee (DBCC) meeting on Tuesday would be to identify which non-infrastructure expenditures should be cut with the suspension of the tax hike.
“Our net revenues are expected to rise as the price of oil went up, therefore the VAT [value-added tax] is going to go up,” Dominguez said. “[However], the value of the peso has dropped so our expenditures will go up.”
At the sidelines of the commissioning ceremony at the Philippine Coast Guard headquarters on Monday, Dominguez said the economic managers have recommended that President Duterte suspend the increase in oil excise tax in 2019 to help tame inflation.
But the finance chief said it is still the President’s call.
“The total estimated foregone revenue is around P41 billion but we are still calculating how much the net revenue will be,” he added. “But we [still] cannot calculate that because we don’t know what the future prices [of oil] will be.”
Under the Tax Reform for Acceleration and Inclusion (TRAIN) law, excise tax on oil products will be gradually increased starting 2018 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.
Finance Undersecretary Karl Kendrick T. Chua said earlier the government may lose around P40 billion in potential gross revenues should a suspension of the excise tax on fuel be implemented, but quickly added that VAT collections from fuel products may help offset the losses.
Under the TRAIN, 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.
Chua explained that suspension of the excise tax increases “will not be forever” and that suspensions “only take effect for a certain period of time.”
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.