Duterte approves second round of fuel excise tax increase

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Metro Manila (CNN Philippines, December 4) — The government will impose an additional excise tax on fuel in 2019 in line with the tax reform law, holding back an earlier plan to shelve the increase, because of substantially lower fuel prices, a Cabinet official said Tuesday.

Budget Secretary Benjamin Diokno confirmed the news in a text message to CNN Philippines. The issue was discussed in Tuesday's Cabinet meeting.

Republic Act 10963, also known as the Tax Reform for Acceleration and Inclusion (TRAIN) law, imposed an annual excise tax on fuel in 2018 to 2020. It also has a provision that allows for the suspension of the tax increase should the global oil price average at least $80 per barrel in three months before the next scheduled tax hike.

Diokno said while fuel prices almost hit $80 per barrel this year, prices have softened and are seen to touch $60 per barrel next year.

"At its peak, diesel price was ₱49.80 per liter, it will be ₱37.76 in January 19, inclusive of the ₱2 peso excise tax. For gasoline (95 octane) it was ₱60.90 at its peak, it will be ₱50.82 in Jan 19 inclusive of ₱2 additional excise tax," Diokno said, adding that the condition for suspending the tax under the TRAIN law does not exist.

Diokno said suspending the additional tax would result on billions of pesos in revenue for the government. The administration is in the middle of implementing an ambitious infrastructure program that needs substantial funding.

"Suspension entails huge revenue loss estimated at ₱43.4 billion," Diokno said.

Economic managers previously recommended the excise tax suspension in the wake of rising fuel prices.

READ: DBCC reverses proposal to suspend oil excise tax hike in 2019

In a statement also on Tuesday, Presidential Spokesperson Salvador Panelo said they expect the additional tax to have a negligible impact on consumer prices

"While the oil excise tax increase is a negligible contributor to inflation, we still commit to provide financial assistance to the 50% poorest households," Panelo said.

Inflation in October stayed at 6.7 percent, the same rate in September. The Bangko Sentral ng Pilipinas expects a lower inflation rate in November at 5.8 to 6.6 percent.

The Philippine Statistics Authority will announce the November inflation data on December 5.