MANILA – Economic managers are in the process of forming a task force to study what happens to government projects already in the pipeline, should the oil excise tax' second tranche be put on hold.
In a briefing Tuesday, Finance Secretary Carlos Dominguez III said members of the inter-agency Development Budget Coordination Committee (DBCC) approved earlier that day the creation of the task force that would assess which items in the budget can be postponed or removed.
In the same briefing, Budget and Management Secretary and DBCC chair Benjamin Diokno said the task force “would be a mirror image of the DBCC (with) not more than five members.”
Among the items that can be postponed include the purchase of vehicles and disbursement of miscellaneous personnel benefit, he said.
This move is in line with the expected lower revenues vis-a-vis the possible suspension of the second tranche of the excise tax hike for oil products, which is initially pegged to cost government by around PHP41 billion.
Under the Tax Reform for Acceleration and Inclusion (TRAIN) law, implementation of the oil excise tax hike may be suspended if global oil prices average at USD80 per barrel in the last three months of 2018.
To date, price of oil in the international market has exceeded USD80 per barrel and economists forecast sustained increase in the coming days due to increased demand and supply-side factors.
Dominguez said they will continue to study the effect of the possible temporary suspension of the second excise tax hike, which is PHP2 per liter for diesel in 2019.
He added that although excise tax revenues will be lower if the suspension pushes through this will be countered by higher collections of value added tax (VAT) on back of the projected sustained rise of global oil prices.
“And a drop in the value of the peso will also increase our revenues from imports,” he said.
Dominguez said eventual suspension of the oil excise tax hike “will help anchor people’s inflation expectations and reduce speculation.”
He said current oil futures show about USD79-80 per barrel up to mid-2019 but the price is seen to go down by July.
Asked if the suspension will end once global oil prices goes down below US80 per barrel, Dominguez said “there’s nothing that says when it can be put back.” (PNA)
