Quite recently, we’ve been discussing the continuing increase of fuel prices in the Philippines, particularly the factors which contribute to such increase. We’ve seen that the rise in fuel prices can be mainly attributed to the price of crude oil in the world market, which has currently breached the US$100/barrel threshold. The Philippines, being a heavy importer of oil, is more vulnerable to price increases, compared to its Southeast Asian neighbors.

We’ve also determined that, apart from the rising price of crude oil in the world market, there are other contributing factors, particularly the excise taxes on fuel products brought about by Republic Act (RA) 10963, or the “Tax Reform for Acceleration and Inclusion” (Train) Law. As you know, the first phase of RA 10963, Train 1, imposed new excise taxes on gasoline, diesel, liquefied petroleum gas, kerosene and bunker fuel, among others.

Specifically, Revenue Regulations (RR) No. 2-2018, which implements the excise tax provision on fuel under the Train Law, imposes an excise tax on unleaded gasoline of P7.00/liter effective Jan. 1, 2018, and will be increased to P9.00 on Jan. 1, 2019, and P10.00 in 2020. The excise tax on diesel, on the other hand, is P2.50 for 2018, and will be increased to P4.50 in 2019, and P6.00 in 2020.

Considering that the prices of basic commodities continue to skyrocket, everyone has been clamoring for the suspension of the excise taxes on fuel products. However, all we’ve been hearing is mostly rhetoric, as most are not aware of the suspension process for the excise tax on fuel under the Train Law.

Under RR 2-2018, the scheduled increase in the excise tax on fuel shall be suspended when the average price of Dubai crude oil reaches or exceeds $80.00/barrel for three months prior to the scheduled increase of the month.

First things first: has the Duterte administration agreed to the suspension of the excise tax on fuel? Yes. No less than Finance Secretary Carlos Dominguez 3rd made this statement: “The decision for us to recommend the suspension was based on a particular week in October, the first week, where the futures were over $80, and on that basis we made that recommendation and we will stick to that recommendation.”

Secretary Dominguez issued this statement amid speculations that the Department of Finance (DoF) is apparently back-pedaling on the decision to suspend excise taxes, now that the world price for crude oil has fallen below $80.00/barrel. Dominguez went on to assure the public that “the suspension of the scheduled increase in excise taxes on fuel next year will still push through even if the trigger price of $80 per barrel will not be met”.

Now that we have that settled, which particular year of excise taxes on fuel will be suspended? It will only be the P2.00 increase in excise taxes which is supposed to take effect on Jan. 1, 2019. So, does this mean that the excise tax of P7.00/liter for gasoline and P2.50/liter for diesel remains? Yes, it still remains.

Now then, can the government suspend the excise taxes on fuel for 2018? As early as May of 2018, the DoF made the announcement that an immediate suspension of the 2018 excise taxes on fuel may not be possible under the Train Law. As pointed out by Finance Undersecretary Karl Kendrick Chua, “while Section 43 of the Train law provides a mechanism to suspend scheduled increases, it also states that the existing excise tax at the time of the suspension cannot be reduced.”

Interestingly, the DoF has also announced that it may re-instate the P2.00 excise tax on fuel for 2019 if the average price of Dubai crude oil falls below the $80.00/barrel threshold for January to March of 2019. When asked to clarify whether the DoF will review the excise tax suspension during the first quarter of 2019, Dominguez noted: “Yes. Because it has to be three months if you follow the law. So we will review it.” So, if during the first quarter of 2019 the average price of Dubai crude oil falls below $80.00/barrel, the P2.00 excise tax may be levied beginning April of 2019.

Manila Times Source

ATTY. PEACHES ARANAS

Managing Partner LMA LAW