DOF exec: Train law suspension mechanism has been triggered

File Photo
File Photo

WITH gasoline and diesel prices projected to stay above the $80-per-barrel level, the suspension mechanism provided in the new tax reform law has been triggered and the second round of excise tax increases on fuel products should automatically be put on hold, a Department of Finance (DOF) official said.

"It (suspension of fuel excise tax increase) should happen automatically if we are within the triggers of the Train (Tax Reform for Acceleration and Inclusion) law," DOF Assistant Secretary Antonio Joselito Lambino II told SunStar Philippines Monday, October 15.

Lambino explained that the recommendation of the economic team was for President Rodrigo Duterte to announce early the suspension of the second round of fuel excise tax.

An early announcement is needed "to help anchor inflation expectations better, and discourage profiteering and hoarding," Lambino said.

"We're sending very strong signals to discourage profiteering and hoarding, both in the commercial and household levels. We also want to make sure that food supply is available and cheap," he added. The elevated prices have been most felt in food.

Lambino said the economic managers - Finance Secretary Carlos Dominguez III, Socioeconomic Planning Secretary Ernesto Pernia and Budget Secretary Benjamin Diokno - agreed to make this recommendation after the International Monetary Fund - World Bank annual meetings in Bali, Indonesia last week.

The recommendation has been transmitted to Malacañang. The President has yet to announce the suspension, but Special Assistant to the President Christopher Lawrence Go announced on Sunday that the President is set to suspend the second round of tax increases.


Under the Train law, the excise tax on fuel would be suspended if the MOPs gasoline and diesel prices breach the $80-per-barrel level.

Domestic pump prices are benchmarked on MOPS, or the Mean of Platts Singapore, the daily average of all trading transactions as assessed by Singapore-based market wire service Platts.

For every $3 change in MOPS, the Department of Energy assumes a P1-per-liter increase or decrease in the domestic oil price.

As of last week, Lambino said MOPS gasoline and diesel prices remained above $80 per barrel and futures trading indicated that prices would remain elevated.

Based on the Department of Energy's (DOE) Oil Monitor, MOPS gasoline and diesel increased per barrel by around US$2.15 and US$ 3.80, respectively, for the October 1 to 5 trading period.

"At the Asian close Wednesday (October 3), S&P Global Platts data showed the benchmark FOB Singapore 92 RON gasoline price slipped from Tuesday's near four-year high by 31 cents/b to $92.19/b, but remained firmly above $92/b," the DOE stated.

Pump prices

Most local oil companies increased per-liter prices by P1.00 for gasoline,P1.35 for kerosene and P1.45 for diesel effective October 9.

From January to October 11, the DOE said domestic pump prices have increased by P11.40/liter for gasoline,P12.15/liter for diesel and P10.70 for kerosene.

Both administration and opposition lawmakers as well as various sectors have been calling for the suspension of the excise tax on fuel, which has been blamed for the elevated inflation rate.

Inflation reached 6.7 percent in September, a nine-year high and the fastest under the Duterte administration.

Government has blamed supply problems, damage from typhoons and the rising crude oil prices for the accelerating prices of commodities.

Under the Train law, which took effect on January 1, 2018, additional excise taxes on fuel are scheduled for implementation on January 1, 2019 to bring the tax rates to: P4.50 on diesel per liter; P2 per kilogram on liquefied petroleum gas (LPG); and P9 per liter of regular and unleaded premium gasoline.

Upon its implementation on January 1, excise taxes were imposed on diesel fuel, P2.50 per liter, and LPG, P1 per kilogram. The rate imposed on regular and unleaded premium gasoline was increased to P7 per liter in 2018. (SunStar Philippines)


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