Benjamin Jacob and Kirsten Geraldine Esteban

Filipinos whine once again as petroleum prices have increased by P2/liter this week, cementing the 11th continuous week of price hikes. For many drivers, this means losing their income, with some jeepney drivers reportedly losing up to P500 a day. Lawmakers now attempt to come up with solutions to reduce the blow to motorists, one of which is removing the excise tax on petroleum.

Excise taxes

An excise tax is another type of tax. Instead of taking a portion of a person’s income, it is added to the price when a good is produced, consumed, or sold in the country. In the Philippines, the government taxes petroleum along with alcohol, tobacco, and minerals.

For example, as of September 18, the current price of diesel for example is P66.30/liter. Of that price, P10.00 is paid for every liter of gas sold by retailers. The remaining price, P56.30/liter, is the buying price globally.

In 2017, former President Rodrigo Duterte signed the Tax Reform for Acceleration and Inclusion Law, more commonly known as the TRAIN Law, which began to impose petroleum excise taxes. The law decreased personal tax but also increased taxes from consuming goods. Other than alcohol, tobacco, and minerals, it also taxed cosmetics, beverages, and automobiles.

The Duterte administration marked the tax reform as “urgent”—after all, they planned to generate revenue to eradicate extreme poverty. While the government gained more revenue through taxes and spent more on public infrastructure, many workers protested against the TRAIN Law due to spikes in fuel prices.

For some fishermen in January 2018 when the TRAIN Law came into effect, the cost of fuel represented 80% of the total expenditures per fishing trip, which cost at most P790. They sometimes could not cover fuel costs with earnings from the fish they sold. Not only was there a petroleum tax, but inflation also accelerated the increase in the prices of goods.

Reversing TRAIN Law

According to the TRAIN Law, the excise tax price could be suspended when the international price of petroleum exceeds $80.00 per barrel (around P4,600 per barrel). The President can also move to suspend the excise tax when proposed by the Senate or House of Representatives. Recently, House of Representatives Speaker Martin Romualdez met with key companies in the Philippine fuel industry to reduce the impact of increased prices by removing the excise tax for three months.

This is not the first time that groups have demanded the removal of the excise tax. As far back as January 2018, groups have called for the suspension of the TRAIN Law and protection from soaring prices. As early as four years ago, there were price hikes on fuel. Before the train law, the price of gasoline was P43.00 per liter. As of September 26, the cost has doubled and now ranges from P62.35 to P90.15. Coupled with inflation, fuel prices burn a hole in many wallets.

This move could theoretically lower the price of fuel. Remove the P10.00/liter tax and the price will decrease by P10.00. However, oil companies remain skeptical of the move since reversing the excise tax would also reverse the profits they made over the taxes. If the move pushes through, these oil companies stand to lose P4.9 billion per month or a total of around P15 billion over three months while the government is projected to lose P73 billion in the last three months of the year.

These oil companies have had the power to dictate the price of gasoline and other fuel products, as provided by the Downstream Oil Industry Deregulation Act of 1998. It stripped the Department of Energy (DoE) of any power to regulate oil prices. The DoE remains neutral as they are yet to consult the Department of Budget and Management, the Department of Finance, and the National Economic and Development Authority. Oil companies have also been silent; the fuel industry has not offered solutions to alleviate the price crisis.

The continuous rise of petroleum prices in our country has been a growing concern for many Filipinos, especially those whose sources of livelihood have been heavily reliant on fuel consumption. While it places oil companies in a struggling situation, the wealthiest individuals should sacrifice their income to favor consumers—even when the excise tax is still in place. Oil companies are responsible for setting petroleum prices, so they should not harm the livelihoods of Filipinos.

Though management of the current fuel prices may benefit as a short-term relief, it is now imperative that we hold the government and oil companies accountable for rising costs in the fuel industry. As workers in the transportation sector struggle financially, our lawmakers should finally stand out and place fair and viable solutions to prioritize the consumers above all others.