LAWMAKERS in the Senate and the House of Representatives moved on Wednesday to ask President Duterte to reconsider the decision to proceed with the second-round fuel excise tax hikes in January, or at least allow for mechanisms to apply the brakes on such once prices jump anew in a volatile world market. They said that, despite projections of declining global oil prices, the specter of sudden spikes compounding the additional tax would burden an inflation-weary public.
Sen. Francis G. Escudero filed Senate Resolution 64 prodding President Duterte to “reconsider the implementation of the second tranche of excise tax on fuel, or at least consider its immediate suspension when inflation becomes uncontrollable again anytime in 2019.”
Escudero’s resolution reminded Malacañang that “inflation already reached a nine-year high in September at 6.7 percent.”
He recalled that the economic managers projected last October that the price and multiple estimates of crude oil from Dubai would stay at an average price above the $80 per barrel threshold for the next two months. However, the price of Dubai crude oil went down in November. “Considering the previous erroneous projection in October, certainty becomes nil at best, and no assurance can ever be had either by the President or the public itself that high prices of goods and services will never happen, not to mention the fact that election spending will definitely exacerbate inflation in 2019, an election year, where demand-pull inflation may likely occur,” said Escudero.
He said postponing the next round of tax hikes will unburden consumers affected by the high prices of goods that began just after the first round of oil tax hike this year.
He cited Section 43 of Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) law, which provides that implementation or suspension of the excise tax on fuel depends upon the recommendation of the Department of Finance (DOF) and the Development Budget Coordination Committee (DBCC) to the President.
‘Premature, impulsive’
Akbayan Sen. Risa Hontiveros said Duterte’s decision to proceed with the collection of the second round of excise tax on petroleum is “premature and impulsive,” and exposed the government’s “wobbly policy” in protecting the public from the negative impact of unstable oil prices.
“President Duterte claimed that we are powerless to respond to the impact of the rise of oil prices in the world market. He also said that we are at the mercy of the international oil market. Then why lift the suspension on the fuel excise tax collection, one of the few safety nets that protect the public from the volatility of the international oil market?” Hontiveros asked.
Hontiveros cited basis to suspend the second round of excise tax on petroleum. She explained that value-added tax (VAT) revenues on various petroleum products have risen and exceeded projected revenues for 2018.
She said that despite the series of oil price rollbacks, the peso cost of petroleum products has been and remains quite high as a result of the depreciated peso and the still high international price of petroleum products.
“During the October 24 hearing of the Senate Committee on Economic Affairs, the Department of Finance admitted that the excess in VAT revenues is indeed substantial. Why then collect more indirect tax revenues via the petroleum industry?” Hontiveros asked.
For 2019, Hontiveros estimated that excess VAT collection will probably be around P10 billion given the lower expected oil prices. The windfall revenue from the VAT on transactions related to high-priced petroleum was never contemplated when the TRAIN law was passed, she said.
Mixed reactions
Some senators, however, gave mixed reactions on Wednesday to Duterte’s decision approving the higher fuel tax.
Senate President Vicente C. Sotto III said he understood the situation then was that imported oil prices were skyrocketing, thus justifying the earlier decision in October to suspend the 2019 round of oil tax hikes. “But now, we have had successive rollbacks,” Sotto said. “The tax will be raised only by P2.50, but the cumulative rollbacks are now about P10. So it’s not surprising that a decision was made to add on the next tranche.”
Sotto urged critics of the move to consider the role of “profiteers” and certain businessmen in fueling inflation. He wondered aloud why, after invoking rising oil prices as basis for jacking up prices of their goods, these businessmen did not roll back prices when the oil prices declined.
He cited projections that oil prices will still go down, to be followed by further rollbacks.
For his part, Senate President Pro Tempore Ralph G. Recto said that while the inflation rate in November was 6 percent, “it is going down but still high.”
“If the Executive increases taxes on oil, it clearly will increase prices and stoke inflation. We can only hope that oil prices will continue to go down,” Recto said in a text message to the BusinessMirror, adding: “Nevertheless, the government should assist those affected immediately and just as fast as they raise taxes. Equally important is to spend those taxes wisely.”
Angara, Gordon, Honasan
Asked how much trust can be reposed on the economic manager’s projection about global oil prices steadily declining in 2019 even after admitting earlier their miscalculation of the world market’s volatility in 2018, Sen. Juan Edgardo M. Angara held out hopes they would learn to be “flexible.
“As quick as they were to move for the reimposition of the hike after moving for suspension earlier, hopefully if prices don’t decline as predicted, they will also be flexible the other way,” Angara, chairman of the Senate Ways and Means Committee, said.
Sen. Richard J. Gordon, in a separate text message to the BusinessMirror, said: “The whole world is volatile now, especially with the sanctions like in Iran.”
Gordon added: “It is not far-fetched to say that Iraq may react also through Opec with all the criticisms on Khashoggi, the possible clash of Russia and Ukraine.”
For his part, Sen. Gregorio B. Honasan II aired concern that the oil price hike issue may end up in finger-pointing.
“When we were discussing TRAIN 1, we heard the best projections from the best minds from government economic agencies. But there are so many variables in this rapidly changing world.”
Honasan recalled that the global oil prices “kept shooting up” just as TRAIN 1’s first round of fuel excise tax hikes “kicked in.”
“So, we can’t make silly predictions that don’t consider everything. The key word is careful. Or caution,” the senator told the BusinessMirror.
House appeal
The chairman of the House Committee on Ways and Means on Wednesday urged the economic managers to reconsider their recommendation to Duterte to implement the second tranche of fuel excise taxes next year.
“Let the President realize that many people are calling for the suspension of excise tax on fuel,” Rep. Estrellita B. Suansing of Nueva Ecija said.
Under TRAIN, for 2019, the scheduled increase in fuel excise tax is P2 per liter. Currently, one bill and six resolutions filed in the House seek the immediate suspension of the excise tax on fuel.
Suansing said a technical working group has been created to consolidate all the proposals. “I hope to finish it immediately.”
Marikina Rep. Romero Quimbo, author of House Bill (HB) 8171 calling for the automatic suspension of the excise tax of fuel, said he will keep pushing for the repeal of the excise tax on kerosene and diesel, as well as the implementation of a more responsive mechanism for the automatic suspension of fuel excise taxes under TRAIN.
HB 8171 seeks to return to zero the excise taxes on kerosene and diesel imposed under TRAIN. It provides for the automatic suspension of the implementation of fuel excise tax increases under TRAIN when inflation exceeds the government’s quarterly target. The bill is a counterpart to Senate Bill 1798 filed by Sen. Paolo Benigno “Bam” A. Aquino IV.
During a House hearing, Finance Assistant Secretary Teresa S. Habitan warned that over P40 billion in government revenue will be lost if the House will pass the proposal.