In the midst of uncertainties on the oil prices in the global market, where in Dubai oil price dropped at 2.9 percent to $80.188 per barrel on October 12, from $82.577 per barrel on October 8 this year, the Senate committee on economic affairs is set to start hearings this week on the impact on inflation of the proposed suspension of the excise taxes on fuel that is expected to pave the way for amendments to the Tax Reform for Acceleration and Inclusion (TRAIN) Law.
Senator Sherwin “WIN” Gatchalian, the Chairman for Senate Committee on Energy said the hearing on Wednesday aims to determine the impact of the suspension of excise taxes on diesel and gasoline ahead of the Department of Finance (DOF)’s full yearend review of the movement of world prices of oil per barrel as President Rodrigo Duterte committed to do so last week.
In a radio interview, Gatchalian said, “We will study this and wait for the suspension (of excise taxes), and try to find out how long this should be… if there’s a need to fix the (suspension) mechanism (under the TRAIN Law) like pegging it to inflation.”
“We may also peg it (average crude price) at $70 per barrel. Why wait until $80 the price level before triggering suspension?
Gatchalian wants all the industry stakeholders to discuss the mitigating measures on rising oil prices. Under the TRAIN, the next round of increases in excise taxes on fuel is suspended only if the price of Dubai crude breaches $80 per barrel on the average in the last three months prior to the scheduled tax hike.
Wirh the volatility of the global price of crude oil, the need to peg the price per barrel is necessary and would ease up the adverse effect to the consumer as this drives the prices of the goods high. The head for Committee on Energy said any amendment to the TRAIN would require another law.
Two weeks ago, the members of the majority bloc wrote to Duterte asking him to suspend the next round of increases in excise taxes as inflation was already nearing seven percent. But TRAIN critics want a suspension or cut in the fuel tax imposed since January this year, without waiting for the $80 trigger.
Based on DOF study, the basic food items such as rice, fish, meat and vegetables have been major drivers of inflation this year, with the contribution of rice alone rising 10 times to one percentage point of the inflation rate.
Also, the data from the Philippine Statistics Agency showed that rice was the number one contributor to inflation in September 2018, and that food items in the consumption basket accounted for more than half of the inflation rate in the same month.
Meanwhile,Ilocos Norte Gov. Imee Marcos also wants the suspension of the value added tax (VAT) on basic commodities such as food, fuel and electricity for at least one year because she believes that this will benefit a wider number of Filipinos at a faster pace instead of waiting for the suspension of the second tranche of excise taxes next year.
“While it is true that VAT revenues accounted for a fifth of overall tax revenues with approximately P365 billion, the national government has the capacity to absorb the VAT revenue loss given the rising tax revenues with the TRAIN Law. Thus, the suspension of the VAT would provide immediate relief to Filipino consumers. Given the magnitude of prevailing tax rates, the temporary suspension of the VAT on basic necessities would be immediately felt by millions of Filipino families,” Marcos explained.
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