Gov't to rework 2019 budget with likely ₱41-B foregone fuel excise tax revenue

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Finance Secretary Sonny Dominguez on Tuesday says around ₱41 billion in revenue will be lost from the suspension of the second tranch of fuel excise tax under the tax reform law.

Metro Manila (CNN Philippines, October 16) — The government will rework the proposed 2019 budget in the wake of possible foregone revenue arising from the suspension of additional excise tax on fuel next year.

Economic managers announced this Tuesday after a meeting to revise targets for the year due to headwinds facing the economy. A task force will review and recommend realignments in the 2019 budget.

The team will be composed of members of the Department of Budget and Management, the Department of Finance, the National Economic and Development Authority, and the Bangko Sentral ng Pilipinas.

Finance Secretary Sonny Dominguez said around ₱41 billion in revenue will be lost from the suspension of the second tranche of fuel excise tax under the tax reform law. This was supposed to take effect January 1, 2019.

Budget Secretary Benjamin Diokno said in a media briefing they are looking into which projects might be postponed or cut.

"There will be a seniority in expenditures. Definitely the most senior will be the infrastructure projects. So maybe they will be exempt," he said.

Diokno said non-infrastructure projects will be reviewed such as purchase of vehicles, as well as maintenance and other operating expenditures. However, he added this will not affect government work.

"It's not going to be a big disruption of our program," he added.

The second tranche of additional excise tax on oil will not take effect in January 2019 if the average Dubai crude oil prices from October to December will stay above $80 per barrel. The Finance Department earlier said President Rodrigo Duterte will suspend the next fuel tax hike to address rising inflation.

Asked how long the suspension will take, Dominguez said, "I don't want to speculate beyond January. The fuel market is very volatile at the moment."

Despite the adjustments, economic managers are pushing Congress to approve other pending tax reform packages.

Economic managers revise PH growth, inflation targets

Meanwhile, the government revised its growth forecast for the country, measured in terms of gross domestic product, from 7 to 8 percent to 6.5 to 6.9 percent this year.

It also forecast a higher inflation rate from 4.8 percent to 5.2 percent, more than double above the target of 2 to 4 percent.

Prices have constantly risen in the past nine months, with September posting the highest level in nine years. However, inflation is expected to slow down to 3 to 4 percent in 2019.

Dominguez said they will also address the impact of global developments on the local economy.

Felipe Medalla, member of the policy-making Monetary Board, said the trade war between the United States and the China would not affect the economy.

"The Philippines is not a major exporter of goods. By all accounts, we are the least affected," Medalla said, saying that the country is a major services provider instead.

However, Dominguez said its residual effect will be felt locally, especially on the impact of possible lower growth for the two economic powers.

The Finance chief also said government is trying to temper inflation by removing import limits on rice so that more of the staple would come in to lower retail prices. Rice is the biggest component in the food basket, which mainly triggered the inflation spike.

The President in September signed Administrative Order 13 to ease the rice import process.

"We are confident that the Philippine economy will weather these storms abroad, but we are not complacent. We are taking very deliberate action to address the issues that we are facing," Dominguez said.