Brace yourselves for the impact of higher taxes on fuel on New Year’s Day.
As the new round of fuel tax increases takes effect on Jan. 1, profiteers may take advantage by artificially inflating the prices of basic goods and services, Sen. Sherwin Gatchalian warned on Saturday.
The chair of the Senate economic affairs committee urged trade and energy officials to preempt the possible skyrocketing of prices of commodities by activating a task force that would “guard against premature price increases and profiteering.”
Under the Tax Reform for Acceleration and Inclusion (TRAIN) law, an additional levy of P2.24 per liter will be imposed for diesel and gasoline. The additional duty consists of P2 excise and 24 centavos value-added tax (VAT).
Gatchalian said the impact of the second round of increase in excise on coal would be 4.8 centavos per kilowatt hour for distributors buying from coal-fired power plants.
President Duterte initially approved a recommendation by his economic managers to suspend the tax hikes under the TRAIN law after inflation rose to a nine-year high of 6.7 percent in September and October amid soaring global oil prices.
He later heeded the economic managers’ call to proceed with the increases when global oil prices softened.
The TRAIN law allows the suspension of the increase in the excise on fuel when the global price of oil averages at least $80 per barrel for three consecutive months.
In the Philippines, the benchmark for refiners is Dubai crude while it is the Mean of Platts Singapore for importers of finished petroleum products.
Last week, Dubai crude declined to $57 per barrel amid sliding oil prices in the world market as a result of rising oil production in North America.
Oil firms in the country said pump prices may go down anew by P1.50 to close to P2 per liter because of falling global fuel prices.
Even with the P2 increase in excise, pump prices will be still lower by P10 to P12, Budget Secretary Benjamin Diokno said early this montn.
Gatchalian, who opposed the administration’s decision to go through with the fuel tax hikes, said the Department of Trade and Industry (DTI) and the Department of Energy (DOE) should work together to closely monitor the implementation of the second round of fuel tax hikes.
Monitor fuel inventories
“Now that President Duterte has approved the implementation of the second tranche of fuel excise tax next year, the DOE and the DTI need to be more watchful to ensure there is no hoarding and profiteering,” the senator said.
Gatchalian also urged the DOE to scrutinize the oil companies’ inventories of crude and refined oil products.
Unscrupulous retailers may take advantage of the latest round of fuel tax hikes by increasing the price of fuel products that were imported before the implementation of the latest tax regime, he warned.
He cited the DOE’s Department Circular No. 2003-01-001, or the “Implementing Guidelines for the Minimum Inventory Requirements of Petroleum of Oil Companies and Bulk Suppliers,” stating that oil firms must maintain a minimum inventory good for 15 days.
But Gatchalian noted that the DOE had experienced difficulty in monitoring the inventory of bulk suppliers and oil companies, and withdrawals from the depots of oil stock a month before the TRAIN law took effect in January 2018.
Vigilance
“These are the times that we should be very vigilant. We don’t want unscrupulous oil retailers taking advantage of the latest fuel tax hike by selling their old inventory products at a much higher price, even if they purchased it at a lower price,” he said.
Gatchalian said he hoped the government’s economic managers would not make the same mistake of failing to account for the indirect effects of the fuel tax increases.
He recalled that during one of the Senate committee hearings on inflation, government economic managers underestimated the impact of the TRAIN law.
Inflation rate
The country’s inflation rate rose to 6.2 percent in the third quarter of 2018, bringing the country’s year-to-date inflation rate to 5.13 percent.
Gatchalian said he believed that working class Filipinos would continue to experience price hikes in the coming months with the implementation of the next round of excise on fuel.
“By now, I expect our economic managers to be more well equipped and well prepared in terms of taming the country’s inflation for next year,” he said.