Legarda bill eyes freeze on fuel VAT

Senator Loren Legarda is considering a Bayanihan 3 Law that would grant President Ferdinand Marcos Jr. more special powers, including to temporarily waive the 12-percent value-added tax (VAT) on food staples and medical essentials, amid the worsening global oil crisis.

During the past administration, the Bayanihan 1 and 2 laws granted then President Rodrigo Duterte special powers to respond effectively and swiftly to the Covid-19 pandemic by implementing public health measures and providing necessary social aid.

The proposal follows concerns raised by several senators criticizing the administration’s supposed slow response and lack of concrete solutions to mitigate the dire effects of the looming oil supply shortage, which will primarily affect the economy, transportation, and food security.

Although the President has declared a national energy emergency, Legarda said the measure falls short of providing concrete relief to Filipinos, given its limited scope in the energy sector.

“The nation deserves a coordinated, detailed, and effective plan that will provide protection and relief in the face of this global crisis,” Legarda said.

The lifting of the VAT on essential goods and services aims to alleviate the economic strain brought about by the global oil crisis to Filipino households, who are already grappling with the soaring prices a month into the United States-Israel war on Iran.

Inflation is expected to hit between 7.4 percent and 8.9 percent this month. It could spike as high as 14.3 percent under the “worst-case scenario” in the months ahead, or when crude oil reaches $200 per barrel for an average of 180 days, Planning Secretary Arsenio Balisacan projected.

Prices rise fast

The forecast is significantly higher than the 2.4 percent recorded in February, and is expected to weaken the purchasing power of Filipinos.

Aside from this, the salient provisions of the proposed Bayanihan Power to the People Act also includes imposing emergency revenue measures like higher taxes on luxury and sin items, as well as taxing the rich to generate additional resources for the government while addressing the adverse effects of the crisis through various forms of social aid.

Legarda has repeatedly criticized the government, citing the lack of clear timelines for immediate and medium-term action, direct consumer price protection, and the continued use of replacement cost pricing by oil companies.

She argued that the VAT was “wrongly imposed” on certain essential goods, including electricity, warranting urgent legislative intervention.

Several senators have also flagged the lack of a unified contingency plan by line agencies, such as the Department of Energy and the Department of Trade and Industry, to assist the government in effectively responding to the imminent inflationary impact of the oil crisis, even after one month into the conflict.

The Bayanihan 3 Law aims to address both the immediate impact of the crisis and its inflationary effects, although the bill has yet to be publicized.

The proposed bill by Legarda, on the contrary, will enable the President to steer the country away from its dependence on imported fuel, which has exposed the Philippines to global price volatility and external shocks.

It also seeks to accelerate the transition toward more stable, sustainable, and domestically anchored energy sources, including the rapid development and deployment of renewable energy, energy efficiency measures, and alternative transport systems.

A counterpart measure has yet to be filed in the House of Representatives.