Senate Minority Leader Franklin Drilon on Tuesday reminded that the Department of Finance (DOF) and the Bureau of Internal Revenue (BIR) has the prerogative to suspend the collection of fuel excise taxes under the Tax Reform for Acceleration and Inclusion (TRAIN) law to cushion the impact of the price hikes on petroleum products.
“There is no stopping the Executive (department), specifically the Department of Finance and the Bureau of Internal Revenue, from suspending the collection of excise taxes on petroleum products, if they really want to mitigate the impact of high oil prices on the cost of goods and living expenses of the ordinary Filipino,” Drilon said in a statement on Tuesday.
Drilon pointed out the provision of the TRAIN Law should be interpreted liberally, not just in light of suspending the increases in excise taxes, but also its imposition.
When Congress passed the Tax Reform for Acceleration and Inclusion (TRAIN) Act, he said neither the government nor Congress anticipated that a crisis such as the conflict between Russia and Ukraine could take place.
Drilon recalled that back then, inflation was a key concern when the TRAIN Law was being discussed. During the plenary debates, he said it was the understanding of the senators that if the inflation hits the top end of the Development Budget Coordination Committee or DBCC estimate or the world price of crude oil exceeds $80/barrel, the operation of the excise tax would be suspended.
But the former justice secretary said “we are in an extraordinary situation” and one that “calls for the liberal application of the law and for compassion.”
“We are not seeking an exemption from taxes here and therefore a strict construction of the law is misplaced. Filipinos are suffering. The burden should be borne by the government. The government cannot just stand and hide behind the law to say that there is nothing that can be done,” he said.
“We cannot wait for the law to be amended before we act. The situation is changing rapidly by the day and we need to act fast,” the minority leader added.
The Senate minority chief issued the statement as local pump prices of fuel products are expected to shoot up this week, the 10th straight in recent weekly hikes.
Gasoline prices are expected to increase by P3.50 to P3.70 per liter while diesel may go up by P5.30 to P5.50. In the event that Dubai crude reaches $120 per barrel, the Department of Energy (DOE) estimates that gasoline prices may rise to P78.33 per liter, while diesel may leap to P68.97 per liter.
“They implement the law. Who will blame DOF and BIR if they suspend the excise taxes on fuel products? Who will file a case against them? Whose rights will be violated if the taxes are suspended? Please stop hiding behind the law. The TRAIN law does not intend to tie the hands of the government and prevent it from responding to shocking increases in oil prices to the detriment of consumers,” he said.
Drilon reiterated the TRAIN law clearly recognizes the government’s power to intervene if the price of oil per barrel exceeds $80USD to cushion the impact on consumers and the economy.
“The intention of the TRAIN law is to give the DOF power to arrest possible inflation. The law recognizes that if the price of oil per barrel exceeds 80USD, then it is bad for the economy and the consumers. This is the spirit of the law,” Drilon said.
The TRAIN Law provides for the suspension of the excise tax hikes during the period 2018 to 2020 when the price of oil per barrel exceeds $80USD. The last increase on fuel excise tax was completed in 2020 but the price of oil has continued to rise since.
When the TRAIN Law was being discussed, Drilon said the price per barrel of crude oil was only at $60.9USD to 73.4USD. It is now at $102 per barrel, the highest in more than seven years, and is expected to continue rising.
“Clearly, the spirit of the law is to give the government elbow room to address situations where the price of crude oil in the world market exceeds 80USD. The law acknowledges that such a scenario will drive inflation to unconscionable levels – a scenario which we want to prevent, mitigate and arrest,” Drilon said.
The DOF may also recommend the implementation or suspension of the excise tax on fuel based on an annual review under the TRAIN law.
If the DOF wants to suspend the collection of taxes, it can, as it has done so in the past, the veteran lawmaker said.
“Our interpretation is that the DOF has the power not just to suspend the increase in excise taxes but also its imposition, whenever the price of oil per barrel exceeds 80USD. We should be mindful of the purpose in putting safeguards in the law. It was to cushion the inflationary effects of fuel prices and the untold hardships it will bring on our citizens,” Drilon emphasized.