Economic managers change mind, recommend fuel tax hike in 2019

MANILA, Philippines – The government's economic managers took back their proposal to suspend the second round of the excise tax hike on fuel set for 2019, now recommending that it should be implemented.

Under the Tax Reform for Acceleration and Inclusion (TRAIN) law, the excise taxes on diesel and gasoline would be increased by P2 per liter effective January 1, 2019. It would also be hiked by another P1.50 per liter in 2020.

The Development Budget Coordination Committee (DBCC) said on Thursday, November 29, that its recommendation to push through with the hike comes in light of the decline in world oil prices.

"Dubai crude oil prices have gone down by 14% from an average of $79 per barrel in October down to $68 per barrel so far in November," said the DBCC.

The oil futures market projects oil prices to go down further to $60 per barrel in 2019.

Finance Secretary Carlos Dominguez III also said the DBCC considered the "adverse impact" on revenues and expenditures for 2019 should the government proceed with the suspension.

The economic managers projected revenue losses amounting to P43.4 billion.

"The erosion in revenue will lead to a commensurate decrease in government expenditures so as not to breach the target deficit level of 3.2% of gross domestic product (GDP) in 2019," Dominguez said.

He added that the suspension is already "unnecessary," as inflation has begun to taper off due to government intervention.

The revised recommendation will be further discussed in the Cabinet meeting on Tuesday, December 4. It is subject to the approval of President Rodrigo Duterte.

The DBCC also revised its assumptions on Dubai crude oil prices from $75 to $85 per barrel to $60 to $75 per barrel in 2019. 

Meanwhile, the government is now gunning for revenue collections to reach P3.2 trillion in 2019, while expenditures are pegged at P3.8 trillion. Economic managers also said they intend to maintain the deficit at 3.2% of GDP. – Rappler.com

Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.

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