By
Rea Cu - October 25, 2018
THE suspension
of the fuel excise tax increase in 2019, a matter on which the Executive and
Congress have reached a consensus
as part of inflation-busting measures, is seen to reduce the country’s
inflation level by 0.2 percentage point, the Bangko Sentral ng Pilipinas (BSP)
said on Wednesday.
BSP Assistant Governor
Francisco G. Dakila Jr. told a joint hearing of the Senate Committee on Ways
and Means and Economic Affairs that, “If excise tax is suspended by the whole
of 2019, we see inflation coming down by 0.2 percentage points.”
At the same hearing,
Finance Undersecretary Karl Kendrick T. Chua
explained that based on his department’s analysis, a reduction to inflation of
0.3 percentage point will be seen if the fuel excise tax increase of P2
per liter is suspended in 2019.
Dakila explained
that the BSP revised its inflation forecast for this year to 5.2 percent coming
from a target band of 2 to 4 percent earlier on, adding that the forecast for
2019 inflation has been increased to 4.3 percent.
Chua, meanwhile,
explained the basis of the Department of Finance estimate. “When we proposed the TRAIN, we also
presented that the 2019 additional increase may increase inflation by
additional 0.3 percentage points. We will not see that 0.3-percentage-point
[increase] if the suspension is for the whole year. If it is less than full
year, it will be a fraction of that. That covers the direct and indirect
effect,” Chua said.
The BSP’s base forecast
of a 4.3- percent inflation rate for 2019 does not take into account yet the
passage of the rice tariffication act, as well as the suspension on the fuel
excise tax increase provision under the Tax Reform for Acceleration and
Inclusion (TRAIN) law. Both measures are part of those listed by economic
managers and lawmakers as helping tame inflation, which hit a nine-year record
of 6.7 percent in September.
The higher fuel excise
tax that kicked in when the TRAIN law became effective on January 1, 2018, was
partly blamed for driving up prices of goods. And, supply issues were seen as
causing the spike in rice prices, prompting both the Executive and Congress to
rush moves to shift from the current quantitative restrictions to a rice
tariffs system.
“However, the baseline [of] 4.3 percent in 2019
does not take into account the impact of rice tariffication. With rice
tariffication, we see inflation being reduced by about 0.7 percentage points
for 2019. It should bring us squarely within the inflation target band,” Dakila
told senators on Wednesday.
Twin measures
The inflation figures from the BSP were also echoed by Research, Education and
Institutional Development Foundation Inc. Vice President for Business
Development Ronilo Balbieran. He said that the rice tariffication law’s
passage, as well as the suspension of the oil excise tax increase, would mean
an inflation level of 3.9 percent.
“In a way, the
country’s inflation will go down for next year. And we would be more happy [if
the suspension is alongside] with the rice tariffication. The impact is between
0.3 percentage points to 0.2 percentage points. We estimated we’d be having
around 3.9-percent [inflation] for 2019,” Balbieran said.
Sen. Sherwin T.
Gatchalian emphasized that the implementation of both measures will help
reduce the country’s inflation, to 3.4-percent, which will fall within the
BSP’s target range of 3 to 4 percent.
“Based on our hearing,
it’s supposed to be a combination of two measures, [the suspension of the oil]
excise tax because it will decrease inflation by 0.2 percentage points and the
rice tariffication by 0.7 percentage points. So if we implement both by next
year, we are looking at 3.4-percent inflation, so that is within the target of
3 to 4 percent,” Gatchalian said.
As for the rice
tariffication bill, he said it will be passed within the year. The House
version was passed on third and final reading earlier.
“The rice tariffication
is a done deal, it will happen, so within the year we will approve [it]. The only question is how it will be
operationalized. If it is implemented in less than one month, then we will see
the decrease in rice prices of around P7,” he added.
The suspension of the
fuel excise tax increase in 2019, meanwhile, will give relief to Filipinos, the
chief of the Economic Affairs and Energy committees
said.
“It’s a welcome
development, the pronouncement of the DOF that they are open to suspend and
they will really suspend the excise tax on fuel come 2019. And the first three
months is already definite,” he added.
Gatchalian said the
suspension must be implemented for six months instead of the minimum three
months to allow for an adjustment period for oil companies.
“For my personal
analysis, three months is short, we would like to request for a suspension for
six months at least because the first three months is an adjustment period,
especially for the oil companies,” he said.
Gatchalian said the
suspension of the oil excise tax increase may be in the form of an executive
order (EO), but added that both the Senate and the House of Representatives
will issue a joint resolution to reinforce the decision to suspend.
“I think they will operationalize
this through an EO. Of course, a joint resolution from the Senate and Congress
will be a good reinforcement,” he added.
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