Exporters are urging the government to reduce the value-added tax on fuel and electricity as rising global oil prices linked to tensions in the Middle East threaten to raise production costs and squeeze Philippine businesses.

Sergio Ortiz-Luis Jr., President of the Philippine Exporters Confederation Inc., said lowering the 12-percent VAT could help companies cope with surging energy expenses that affect manufacturing, transport and logistics.

Immediate lowering of fuel prices

He noted that suspending or removing excise taxes on fuel, if approved by Ferdinand Marcos Jr., could immediately lower pump prices by about P6 to P10 per liter.

“Lower the value-added tax on fuel and electricity to provide relief, even if you remove the excise tax. This is meant to help prevent fuel prices from rising too much,” he said in Filipino on a radio interview Saturday.

Exporters warn that rising fuel costs could ripple across the economy by increasing logistics expenses and forcing companies to scale back operations.

Subsidies needed

“If gasoline prices increase significantly, it will certainly drive inflation and make things more difficult for everyone. Logistical costs will go up, companies will face higher expenses, and workers will also be affected. Without subsidies, many people will really struggle,” Ortiz-Luis said.

The PHILEXPORT chief acknowledged that previous proposals to cut the VAT were not supported by exporters, as the measure was seen to benefit higher-spending consumers and large firms more than low-income households.

“Lowering the VAT would not necessarily benefit the poor. Instead, the savings would mostly go to those who spend more — large companies and wealthier consumers,” he said.

However, the current spike in global oil prices has renewed calls for tax relief as businesses face mounting operating costs.

Ortiz-Luis warned that prolonged instability in the Middle East could eventually force some firms to close, potentially leading to job losses.

He added that rising fuel prices are particularly burdensome because oil imports are paid in dollars, putting pressure on the peso.

Shrinkage in peso’s purchasing power

“Even our advantage of having many OFWs (overseas Filipino workers) sending remittances home may be affected, as some of them could be hit by the situation and may send less money. At the same time, the purchasing power of the peso keeps shrinking because we are paying more dollars for fuel imports,” he said.