Will suspending the fuel excise tax have an effect on inflation?

A senator files an inquiry
by Jason Tulio | Oct 23, 2018
PHOTO: StockSnap/Pixabay

Will the suspension of the fuel excise tax next year (more on that here) help mitigate inflation? It’s a burning question that lawmakers and taxpayers alike want answered.

Senator Win Gatchalian, who chairs the Senate Committee on Economic Affairs, has filed Senate Resolution No. 917 following President Rodrigo Duterte’s announcement that he will suspend the scheduled fuel excise increase next year.

Under the Tax Reform for Acceleration and Inclusion (TRAIN) law, excise tax on petroleum products are scheduled for increase in three tranches between 2018 and 2020. If the price of Dubai crude averages $80 per barrel for three months, however, the law calls for an automatic suspension of this excise tax.

Based on data from the Department of Energy, Gatchalian points out that fuel prices have increased by P9.40 per liter for gasoline and P9.35 per liter for diesel as of late September. Gatchalian says that only P2.65 per liter of the gasoline price increase and P2.50 of the diesel price increase can be attributed to TRAIN.

“Additional inflationary pressures are expected to come from the following sources in the coming months: higher global oil prices; minimum wage hikes granted starting October; higher airline fares due to fuel surcharge; additional fare hike petitions by buses, taxi, and jeepneys; weather disruptions which usually come in the fourth quarter of the year; and the further weakening of the peso,” Gatchalian says.

So what do you guys think? Will suspending the fuel excise tax increase next year help ease our economic problems? Sound off below.

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