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The tax stops at $80: Recto explains ‘circuit breaker’ in TRAIN Law that will bring down oil prices


The tax reform law has a “tax-freeze” provision which must kick in when the benchmark price of crude oil in the world market reaches $80 a barrel.

Senator Ralph Recto stressed this on Thursday amid calls to suspend the excise tax on fuel under the Tax Reform Acceleration and Inclusion (TRAIN) law due to continued rise in the prices of basic goods.

“Walang ‘unli’ na basis ang presyo ng langis. May ceiling dapat. Pag umabot ng $80, stop. The reason being is that government should not profit from high oil prices,” Recto said.

The senator said that the TRAIN law or Republic Act 10963 explicitly provides for this “price triggered collection moratorium.”

This was reiterated in the Bureau of Internal Revenue (BIR) Regulation No. 2-2018, the TRAIN’s Implementing Rules and Regulations (IRR) on petroleum products.

Section 5 of Revenue Regulation 2-2018 states that “for the period covering 2018 to 2020, the scheduled increase in the excise tax on fuel as imposed in this section shall be suspended when the average Dubai crude oil based on Mean of Platts Singapore (MOPS) for three (3) months prior to the scheduled increase of the month reaches or exceeds eighty dollars (USD80) per barrel.”

“The tripwire is $80 per barrel, based on Dubai crude as reflected in MOPS,” Recto said.

“Ito ang circuit breaker sa TRAIN. When oil touches this price, suspended ang excise tax increase on gas,” the Senate president pro tempore said.

However, he deplored that for this to take effect, the Department of Finance (DoF) said that it must first issue a separate IRR.

But Recto said the language of the law is clear. “So it must be self-executory and automatically implemented.”

“Kung gaano kabilis mangolekta ang TRAIN, ganoon din dapat sa pagpreno kapag sobra nang bilis ang pagtaas ng presyo ng gasolina,” he stressed.

Gasoline has soared to an average P54.37 per liter this month from P32.72 in February 2016.

Meanwhile, Dubai crude posted a selling price of almost $75 per barrel two days ago.

“But what is compounding is the weakening of the peso against the dollar,” Recto said, with the dollar fetching P52.41 on Tuesday, a 13% increase from $1 to P46.28 exchange rate 25 months ago.

Weak peso and soaring prices of oil form a volatile mix when it comes to transport and cooking fuel prices,” Recto said.

“Kaya hindi lang oil price, tingnan rin pati ang strength of the peso, kasi kahit $50 lang ang presyo ng langis kung sisirit naman, halimbawa, ng P80 ang palitan ng piso sa dolyar, lolobo rin ang halaga ng gasolina,” he said.

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