Senator Joel Villanueva filed a bill seeking to fix the fuel tax increase under the Tax Reform for Acceleration and Inclusion (TRAIN) Law.
The TRAIN Law raised the excise taxes on fuel products effective January 2018. The law also provides for additional increases scheduled in 2019 and 2020.
Under Senate Bill No. 2014, the scheduled increases will be suspended, and the excise tax rates will be reverted to their pre-TRAIN rates if all the following three conditions are present for a period of three consecutive months within any period prior to January 1, 2021: a) Inflation exceeds government target; b) Average price of food increases beyond 7%; and c) Crude oil price exceeds Php4,080 per barrel.
In further explaining the proposal, the senator stressed that the three conditions will serve as a “circuit breaker” against the undue burden of higher taxes.
"It is unfortunate that our economic managers gave us data and parameters during the deliberations of the TRAIN Law which later turned out to be far from accurate. Our goal now is to fix the law to make it more sensitive to the most vulnerable. It is currently self-defeating if we are creating unnecessary burden to the very same people that we wish to help in the first place,” Villanueva added.
The senator further explains that the three conditions take into account the economic situation faced by ordinary Filipinos on a daily basis.
According to Villanueva, the inflation condition intends to help reduce the aggravating effects of fuel tax if inflation exceeds government outlook.
On the other hand, adding a condition relating to food prices will help minimize the impact of fuel taxes on the welfare of the Filipinos.
“Filipinos allot as much as 60% of their budget on food. We already have more than 8 million Filipinos who fail to meet their basic food requirements on a daily basis, and even more people would suffer from higher prices. If food prices become too high, my proposal is to temper production cost by lowering the fuel tax,” he explained.
In addition to food price, the bill also introduces a condition to reverse the excise if the price of crude oil in the world market reaches Php4,080 per barrel.
In the TRAIN law, future increases will be suspended if the crude oil price in the world market exceeds USD 80 per barrel.
According to Villanueva, the current condition in the TRAIN Law is insufficient because it is not sensitive to the exchange rate fluctuations.
The bill converts the trigger price to the local currency to take into account further peso depreciation in the future, which could compound the rising price of oil in the world market.
“If we find our country faced with rising inflation, higher food prices, and further peso depreciation, and yet we allow high oil taxes to prevail, then the government would only be serving itself and not the people,” Villanueva noted.