2nd excise tax hike on fuel products correct, says UP economist

MANILA, Philippines — Proceeding with the second tranche of the excise tax hike on fuel products mandated under the Tax Reform Acceleration and Inclusion (TRAIN) law was “correct,” a national scientist and professor emeritus in the University of the Philippines School of Economics said Friday.

“I believe that we should keep TRAIN 1 on track and I think Malacanang’s decision … that’s correct,” Raul Fabella said during his presentation at the “Pilipinas Conference 2018” organized by the Stratbase Albert del Rosario Institute in Makati City.

Fabella also said the government should “keep TRAIN 1 on track” citing the downward trend in international crude prices.

“After all, we’re seeing some downward trend in the international fuel prices and when the global fuel prices are in the downward trend, it’s always the time to do structural reforms because the inflationary effect, especially because of tax adjustments, would not be felt as much,” he said.

On Wednesday, Malacañang approved the implementation of the second tranche of oil excise tax hike in January amid decreasing international crude prices.

READ: Palace OKs implementation of 2nd fuel tax hike

An excise tax of P2.50 a liter was imposed on diesel and bunker fuel starting this year due to the TRAIN Act. This would go up to P4.50 in 2019, and P6 in 2020. The excise tax on gasoline also increased to P7 in 2018, and then to P9 in 2019 and P10 in 2020.

Fabella also backed the passage of the Tax Reform for Attracting Better and High-quality Opportunities bill, the second package of the Duterte administration’s comprehensive tax reform program, but with “better regard for tradables.”

The economist also urged the government to “minimize uncertainties” from political projects like the push for federalism and the move to end contractualization, as well as “restore property rights stability on agriculture.”

Meanwhile, Calixto Chikiamco, president of the Foundation for Economic Freedom, has warned the government that “Philippine growth will be constrained by the weakness in its agricultural and export sectors.”

As a solution, Chikiamco said foreign direct investments should be increased by “removing constitutional restrictions on foreign investments.”

He also said there is a need to increase agriculture productivity by freeing-up the rural land market and removing Comprehensive Agrarian Reform Program restrictions, and diversify exports by enacting a stable mining policy and amending the Labor Code. /lb