mb18d ago
**media[87781]** Filipino commuters and public utility vehicle (PUV) drivers have begun grappling with the burden of rising fuel prices due to the escalating war in the Middle East. One measure the current administration is fast-tracking is the passage of a law that would allow President Ferdinand Marcos Jr. to suspend or reduce excise taxes imposed on fuels. Last week, the Lower House passed on final reading House Bill No. 8418, a bill authorizing Marcos Jr. to temporarily suspend or cut excise tax collections on fuel products, an emergency power that can be used when crises affecting oil supply hit the Philippines. When global and domestic risks to oil supply heighten and threaten to trigger a spike in fuel costs, the President may order a halt to taxes added to fuel prices. This could be imposed for up to six months. Such a move promises to lift the burden on motorists agonizing over skyrocketing pump prices. Now, what would happen in a scenario where the President directs a fleeting removal of taxes from fuels? Unleaded premium gasoline faces the highest excise tax at ₱10 per liter, as outlined under the Tax Reform for Acceleration and Inclusion (TRAIN) Law. This is followed by duties levied on diesel at ₱6, kerosene at ₱5, and liquefied petroleum gas (LPG) at ₱3 per liter. According to private sector economists, scrapping the excise taxes on fuel may offer just quick relief. Relief for consumers “Suspending fuel excise taxes can give quick, visible relief—roughly a few pesos per liter—and consumers usually feel it within a week or two, but it’s not a cure-all,” Reyes Tacandong & Co. Ravelas senior adviser Jonathan Ravelas said. This view was echoed by China Banking Corp., Bank of the Philippine Islands (BPI), and Union Bank of the Philippines. Chinabank chief economist Domini Velasquez and UnionBank chief economist Ruben Carlo O. Asuncion explained that removing the excise taxes on fuels only partially offsets the accumulated price increases seen since the onset of the Middle East war and the added cost if this geopolitical rift persists. “Under a full suspension, consumers can realistically expect pump prices to fall by the amount of the excise tax itself, plus the associated value-added tax (VAT) that is applied on top of it,” Asuncion said. This means consumers save a few pesos per liter depending on the fuel, with retail prices adjusting quickly—often within one to two pricing cycles—since fuel taxes are clearly reflected. Velasquez, meanwhile, stressed that tax relief is only part of the overall price hikes Filipinos are facing. Diesel and gasoline prices are expected to rise next week, extending the streak of hikes that have significantly raised costs for the nation’s transport sector and consumers in general. Based on the regional benchmark for refined products, diesel prices may increase by ₱14 to ₱14.50 per liter, while gasoline could rise by ₱7 to ₱7.50 per liter. If these estimates materialize, retail diesel prices could reach ₱108 to ₱129 per liter in some areas, adding pressure on PUV (jeepney, bus, van, taxi, tricycle, etc.) operators already grappling with record-high operating costs. “Even after accounting for the associated VAT reduction, this only offsets a portion of the roughly ₱30-per-liter increase in gasoline and ₱49-per-liter increase in diesel since the onset of the Iran conflict,” Velasquez said. VAT is a 12-percent fee charged on various products. Emilio S. Neri Jr., senior vice president and lead economist at BPI, noted that putting a halt to excise taxes will merely serve as temporary friction to the soaring fuel price—it will “not lower prices.” “It’s a relief, but the pain cannot be avoided. Right now, I don’t think prices fully reflect the increase in global and regional costs,” Neri said, stressing that the actual prices for retail consumers are only translating gradually. “If this conflict stays longer, the burden on Filipinos will only grow,” Neri said, a view shared by Asuncion. Asuncion said that while an excise tax suspension would offer relief to Filipinos’ pockets, fuel prices remain influenced by global oil prices, the strength of the peso, and the cost of distributing fuel through the supply chain before it reaches consumers. “This means households may feel some short-term easing, but it does not fundamentally shield them from prolonged energy price pressures,” Asuncion said, adding that a tax suspension cannot be used to tackle elevated fuel costs. Both Asuncion and Ravelas asserted that gains tend to be front-loaded, short-lived, and limited, while the fiscal cost for the government can be tremendous and “permanent” in a scenario where global oil prices continue surging. Fiscal cost Finance Undersecretary Karlo Fermin Adriano earlier told lawmakers that the government’s overall revenue could contract by ₱136 billion by the end of 2026 should the President suspend excise taxes and VAT on petroleum products. Broken down, the suspension could lead to roughly ₱121.4 billion in revenue losses from excise tax and ₱14.6 billion from VAT. Asuncion noted that repeated suspensions of fuel excise taxes pose serious fiscal and policy risks, as they can undermine the credibility of tax policy by creating expectations that taxes can be easily reversed whenever prices increase. “Fuel excise taxes were originally designed not only to raise revenue but also to help fund infrastructure and manage externalities. Frequent suspensions reduce these revenues while leaving expenditure needs unchanged, potentially widening the fiscal deficit unless offset by higher borrowing or spending cuts elsewhere,” Asuncion said. For 2026, the government is aiming to collect ₱4.98 trillion, with tax earnings accounting for a bulk of ₱4.63 trillion. Tax revenues will be driven by the Bureau of Internal Revenue (₱3.58 trillion) and the Bureau of Customs (₱1.01 trillion). Customs collected ₱247.1 billion in fuel excise taxes last year through its fuel marking program (FMP), up nearly two percent from ₱242.36 billion in 2024. Meanwhile, the government is expected to spend ₱6.63 trillion this year, higher than what the economy is expected to earn. This will leave the government with a ₱1.65 trillion deficit, which is now at higher risk of widening due to the looming order to stop collecting excise taxes on fuel. Velasquez said the government has historically been cautious about trimming taxes levied on fuel products because of tight fiscal space. Both Velasquez and Asuncion pointed out that this measure would mainly benefit high-income households that consume more fuel, making the broad policy more costly on the government side—a risk that could be avoided if the government shifted to offering targeted subsidies. “Given current conditions, a more targeted approach—such as subsidies for the most affected households and transport workers—remains the more prudent policy response. Considering the magnitude of global oil price increases, there may even be a case to expand these subsidies further,” Velasquez said. Similarly, Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said subsidies must be given to the poorest sectors, including PUV drivers, fisherfolk, and the agricultural sector. Data from the Singapore-based Oversea-Chinese Banking Corp. Ltd. (OCBC) showed that despite being vulnerable to higher global oil prices, the Philippines has been notably proactive in its policy response. It is the only nation to have implemented every mitigation measure, including prioritizing vulnerable sectors, strategically directing the supply of natural gas to essential industries and power plants, finding alternative sources of energy imports, removing or reducing related taxes, and offering emergency funds to help businesses and Filipinos manage high costs. As of writing, the Philippines holds a month’s worth of oil reserves, almost the same size as those of Indonesia and Vietnam, but significantly less than the four-month stock buffer maintained by Thailand.
