New House Bill could reduce fuel tax whenever prices go up

Fuel prices have been at an all-time average high in recent months. The global climate and the oil industry’s developments have been keeping oil prices up in the Philippines and the rest of the world. A new House Bill seeks to cushion the blow of high fuel prices in the country, and it remains to be seen whether it will be enacted or not. 

As such, there was a bit of a push in order to suspend or modify the excise tax since fuel prices don’t seem to be going down. In fact, this new development follows a major fuel price hike of nearly P7.00 per liter of diesel. 

Fuel is a non-elastic good, and a high fuel price puts a strain on the economy of a country generally raising the prices of products across the board. As such, it may make sense for there to be a suspension or a reduction of fuel excise tax by amending the existing train law. 

House Bill No. 3628 has been filed to gradually decrease the excise tax as fuel prices increase. According to the current tax rate for fuel, there is a P10 tax and P6 tax on gasoline and diesel, respectively, according to Republic Act No. 10963 which is more commonly known as the TRAIN Law. 

The contents of House Bill no. 3628 aim to bring down the tax rate of fuel to as low as P4 for gasoline and P3 for diesel depending on the current price of fuel, and it also puts forward a variable rate for fuel tax. If fuel prices are at P50 or lower, the full P10 excise tax rate will be collected. Then, once prices go up, the excise tax rate will decrease by P1 for every P5 that the prices increase. In theory, if fuel prices hit P55, then the excise tax will be set at P9 per liter. The ceiling will be at P75 or higher, in which case, the tax rate will be set at only P4. 

It’ll be the same setup for diesel, but the rate of the tax decrease will be set at P0.50 centavos for every P5 after P50. The effect of the proposed House Bill will also cause the excise tax to bottom out at only P3 per liter when fuel prices reach P75 or higher. 

It remains to be seen whether this house bill will take effect, however, but it is a sound solution in order to cushion the blow coming from all these fuel price hikes.