Oil excise tax halt, VAT removal have little impact on fuel crisis—CenPEG

As lawmakers in the House of Representatives and the Senate move to pass a bill suspending the excise tax and value-added tax (VAT) on petroleum products, a think tank from the Center for People Empowerment in Governance (CenPEG) said the proposal would have only a limited impact and fails to address the root causes of the country’s oil price crisis.

CenPEG chairperson and fellow Prof. Roland Simbulan said the proposed suspension, though presented as immediate relief for consumers, would have minimal effect on pump prices.

“The excise tax on diesel is only about P6 per liter. Even if this is completely suspended, the price of diesel will fall by only around P6 per liter,” Simbulan said.

The Department of Energy on Monday announced another round of big-time oil price hikes beginning March 17, with gasoline set to increase by P12.90 to P16.60 per liter, diesel by P20.40 to P23.90 per liter, and kerosene by P6.90 to P8.90 per liter.

“If diesel is currently priced at around P100 per liter, removing the excise tax will only bring it down to about P94 per liter. Compared to previous price levels of around P58 per liter, most of the increase—about P42 per liter—will still remain,” he added.

Simbulan said that even with the suspension of the excise tax, fuel prices would remain significantly high, leaving consumers to bear the burden of the oil price crisis.

“The main driver of rising fuel prices is the deregulated structure of the oil industry under the Oil Deregulation Law of 1998,” Simbulan said.

Under the current system, oil companies are allowed to freely set prices based on movements in the global market, enabling them to quickly pass on increases to consumers while protecting their profit margins, he said.

“In this context, suspending the excise tax becomes a symbolic measure largely. It allows the government to show that it is taking action against rising oil prices, even if the actual impact on consumers is limited and temporary,” Simbulan said.

He said the government should not limit discussions to excise taxes alone.

“Why is the suspension of the VAT on petroleum products not being seriously considered, when VAT represents a much larger portion of the tax component in fuel prices?” Simbulan asked.

He said Congress could go beyond suspending excise taxes by also proposing the suspension of VAT on petroleum products and eventually reviewing the continued imposition of VAT on fuel.

Simbulan also called for reopening discussions on reviewing or repealing the Oil Deregulation Law of 1998 and conducting stronger investigations into oil companies’ pricing practices.

“In many instances, petroleum products being sold in the market come from stocks imported earlier and stored before new geopolitical tensions or price spikes occur. Yet local prices are raised immediately, raising questions about pricing practices,” he said.

He added that the oil price crisis cannot be separated from broader economic disruptions caused by escalating global conflicts and geopolitical tensions affecting global energy supply and markets.

Simbulan urged the government to prioritize the welfare of ordinary Filipinos by reallocating public funds from what he described as questionable or less urgent expenditures—such as pork barrel-type allocations, confidential and intelligence funds, and large budgets for counterinsurgency programs, including the National Task Force to End Local Communist Armed Conflict—toward social services and direct subsidies.

“These funds could instead support targeted subsidies for public utility vehicle drivers, farmers, fisherfolk, and other sectors that are most affected by rising fuel prices, while strengthening social protection programs for poor households,” Simbulan said.

“The public needs more than temporary relief. What is needed are structural reforms that address deregulation in the oil industry and prevent the continued transfer of the oil price crisis to ordinary consumers,” he added.

According to Simbulan, the government must ensure that policies during periods of global economic instability prioritize public welfare over the protection of corporate profits.