Lawmakers set review of higher fuel, coal tax

By Cai U. Ordinario / Butch Fernandez / Elijah Felice E. Rosales - October 5, 2018

https://businessmirror.com.ph/lawmakers-set-review-of-higher-fuel-coal-tax/

LAWMAKERS moved on Thursday to consider the suspension of two taxes embraced by the Tax Reform for Acceleration and Inclusion (TRAIN) law, seen to spur inflation by swelling prices on fuel and power rates, which both cut across key economic sectors.

Some members of the House of Representatives are pushing for the suspension and repeal of the excise taxes imposed on fuel by the TRAIN law.

In the Senate, the chairman of the Energy panel said he will support a review of the coal tax that businessmen had blamed on Wednesday for further bloating power rates, adding that the gap between rates in the Philippines and those in its neighbors have widened to as much as P4 to P7 per kilowatt-hour.

The Philippine Chamber of Commerce and Industry (PCCI) has asked the government to defer imposition of the next-round increase on the coal tax, fearing this will trigger upward adjustments in power rates affecting the economy.

Senate President Vicente C. Sotto III did not rule out the possibility that senators will back the PCCI’s plea. “Maybe, but we will review it first,” Sotto told the BusinessMirror on Thursday.

Senator Sherwin T. Gatchalian, Energy Committee chairman, confirmed that “members of the Committee will review it,” referring to the scheduled imposition of the higher coal tax in 2019. The TRAIN law, which took effect on January 1, imposed sequential increases on fuel excise taxes and the coal tax. It has been widely blamed for largely fueling the record inflation from which most sectors are now reeling.

 “[But] we are still studying it,” Gatchalian said in a text message to the BusinessMirror, referring to the review of the coal tax that PCCI sought.

Asked by the BusinessMirror if he was amenable to the PCCI proposal to defer the next round hike in coal tax to blunt the power rate surge and avert a domino effect on all economic sectors, Gatchalian declared he was “against that from the beginning.”

“It is useless,” Gatchalian added of the tax that public interest groups had pushed for environmental reasons. Gatchalian noted that even after the tax was mandated by the TRAIN law, there were more coal plants and yet the price of power increased.

He explained that deferring implementation of the 2019 phase of the coal tax as scheduled by law can only be done “by law,” meaning, by remedial legislation.

Fuel, too

This developed as the senators’ counterparts in the House of Representatives also moved to repeal fuel excise taxes on diesel and kerosene imposed in the TRAIN law.

Surigao del Norte Rep. Robert Ace S. Barbers on Thursday filed a bill repealing Section  43 of Republic Act 10963 or the TRAIN law.

Edcel C. Lagman of the First District of Albay urged the House leadership to approve Joint Resolution 27, which seeks to suspend the increase in the excise taxes on fuel. It was filed on September 10, 2018, by Lagman and members of the Magnificent 7, Makabayan Group and People’s Minority.

House Bill 8369 filed by Barbers states that excise taxes on fuel under the TRAIN law will be reverted to the old National Internal Revenue Code rates of excise tax on fuel.

Barbers said the burden of the higher excise taxes on fuel still falls heavily on the shoulders of minimum-wage earners. Lagman said the high excise taxes compound the already high fuel costs, which already breached the $80 per barrel mark.

Section 82 of the TRAIN Act seeks to mitigate the effects of the law by providing unconditional cash-transfers, fuel vouchers to qualified public-utility vehicles franchise holders, fare discount, reduced price of National Food Authority rice, and free skills training.

Barbers said, however, that Filipinos could continue to suffer from high commodity prices, since Section 82 of the TRAIN law first requires full implementation of the National ID system to ensure that the grants will reach the legitimate beneficiaries.

Joint Resolution  27 urged the government to exhaust all complimentary measures to confront the inflation problem by addressing other causes of inflation, among others: a disjointed agricultural policy on the timing and amount of rice imports; lack of agriculture sector support; weak peso that make imports more expensive; and weak implementation of the Responsible Parenthood and Reproductive Health Act.

PCCI’s plea

The PCCI wants the government to suspend the excise tax on fuel to allow businesses and consumers alike to cope with the rising prices of basic goods.

In a recent interview with reporters, PCCI President Maria Alegria Sibal-Limjoco said her group has relayed to Finance Undersecretary Karl Kendrick T. Chua its recommendation to suspend the petrol tax under the TRAIN law. The proposal was in response to oil prices accelerating at unprecedented levels the past weeks.

“Of course, we have informed [the Department of Finance] about the suspension, if they can suspend it probably. The recommendation of Usec. Karl was that the suspension will be more difficult. They are saying probably it will be better if they give subsidy to those in need,” Limjoco said.

Brent crude this week nearly breached $83 per barrel, after it went up 16 cents to $82.89 a barrel on Monday.

Likewise, pump prices of petroleum products on Tuesday rose for the eighth straight week to reflect movements in the global crude market. Prices of gasoline increased P1 per liter, diesel P1.35 per liter and kerosene P1.10 per liter.

Still, finance officials insisted there is no need to call off excise tax on oil as imposed by the TRAIN, nor defer the next round of increase by P2 on January 1, 2019. Under the law, the provision can only be suspended if Dubai crude prices average at least $80 per barrel for three consecutive months.

Limjoco argued the government should control what it can control, and vowed the PCCI will continue to pressure the government to suspend fuel tax. “Yes,” she replied, when sought if the group’s position stands to date, “because the increases [on gasoline prices] are just too much.”

She said the PCCI will utilize the upcoming Philippine Business Conference to echo its statement that the excise tax on oil be suspended. The PBC is the country’s largest business forum attended by both local and international business executives, government officials and economists, among others.

Like the PCCI, the Employers Confederation of the Philippines has also recommended the suspension of petrol tax to weather the cost of transport and power. In a statement in September, the group said the government should consider deferring the automatic oil-tax increases in the coming years.