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Government to slash non-infra budget after oil tax freeze

The government may reduce its non-infrastructure spending, once it suspends the second tranche of oil excise taxes, Finance Secretary Carlos Dominguez III said Monday.

Dominguez, who leads the inter-agency Development Budget Coordination Committee, said cutting non-infra spending would be an option while the DBCC was looking for contingency measures so that infrastructure spending would not be affected by the expected P40-billion revenue loss with the fuel excise tax suspension.

“The DBCC has various options of handling the expected revenue shortfall such as cutting non-infra spending,” Dominguez said in a statement.

The second tranche of excise taxes on fuel was contained in the Tax Reform for Acceleration and Inclusion which was signed into law by President Rodrigo Duterte in December last year. Under the Train law, personal income taxes were reduced, while excise taxes on fuel, tobacco, alcohol, and automobiles were increased.

The excise taxes on diesel fuel were increased by P2.50 per liter in 2018, while the excise taxes on gasoline were adjusted by P7 a liter.The train law also provides that beginning 2019, excise taxes for diesel will be increased by P4.50 a liter and gasoline by P9 a liter under the second installment of the law.

Special Assistant to the President Christopher Go said in an event in Makati City Sunday the president’s planned to suspend the second tranche of excise taxes on oil to temper the accelerating inflation.

“As announced by SAP Bong Go, the President is making an early announcement of the temporary suspension of the January 2019 oil excise increase under the Train Law. This announcement is being made two months before the time required by law, to proactively anchor inflation expectations and enhance the welfare of the Filipino people,” Finance assistant secretary Antonio Lambino II said over the weekend.

“After consulting the leadership of both the Senate and House of Representatives, as well as the economic team, the president is confident that this course of action will help anchor inflation expectations for the coming year, allow the public to manage their finances better, and disallow hoarders and profiteers from taking advantage of the situation,” he said.

Go on Sunday said the trigger price of $80 per barrel for three consecutive months should be met before the excise tax on oil could be suspended by January 2019.

Go said there was a provision in the Train law that suggested if the index selling price of oil in Dubai reached at least $80 per barrel on the average of three consecutive months, the government may suspend the excise tax.

Dominguez said “as of last week, oil prices have been trading slightly above $80 per barrel and futures out to the end of the year were also above $80/barrel.”

Dominguez said t”the increased oil prices and peso depreciation will have a positive net effect on our revenues.”

Go said the suspension of the excise tax would mean P40 billion in lost revenues for the government.

Data from the Department of Budget and Management showed that the government’s infrastructure spending jumped 41.6 percent in the first half to P352.7 billion from P249.1 billion a year ago. This was driven by the implementation of projects under the Department of Public Works and Highways.

The first-half figure was also 4.3 percent higher than the government’s program for the period of P338.3 billion.

READ: Tax freeze to curb inflation—DoF

Topics: Carlos Dominguez III , Department of Finance , Development Budget Coordination Committee , Rodrigo Duterte
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