Senators on Thursday proposed several proactive measures to help the public cope with the anticipated economic impact of the escalating conflict in the Middle East, including the temporary suspension of value-added tax (VAT) and excise taxes on fuel.
Senate Bill 1935, filed by Senate Committee on Foreign Relations chairperson Erwin Tulfo, seeks to amend Sections 106, 107 and 148 of the Tax Code, which cover VAT on the sale of goods, importation of goods, and taxes on manufactured oils and fuels.
The proposal aims to automatically suspend VAT and excise taxes on petroleum products when global oil prices surge.
The measure was filed despite concerns raised by Senator Win Gatchalian, chairperson of the Senate Committee on Finance, who warned that suspending excise taxes alone could result in as much as P300 billion in foregone government revenues if implemented for a year.
Under the current system, the Philippines imposes a 12 percent VAT on the sale of domestic goods, services and imported goods.
Excise taxes, on the other hand, are imposed on specific products such as alcohol, tobacco, petroleum and sweetened beverages. The rates on many of these products were increased under the Tax Reform for Acceleration and Inclusion (TRAIN) Law.
If enacted, the proposed measure would temporarily suspend VAT on the sale and importation of fuel once the average Dubai crude oil price exceeds $80 per barrel.
The same trigger would apply to the suspension of excise taxes on petroleum products.
Tulfo acknowledged the concerns over possible revenue losses but warned that maintaining fuel taxes during a global crisis could trigger widespread price increases affecting Filipino consumers.
“The transportation cost of food coming from the provinces, from various places, will all increase. Even imported goods from China will also increase. Because, of course, they will be shipped here through cargo ships while the fuel cost is also increasing,” Tulfo said during a press briefing.
“This will be the main reason. When fuel prices increase, everything else will rise, and we will be affected,” he added.
Senator Bam Aquino also called for the reactivation of the government’s fuel subsidy program for transport sector workers to cushion the impact of rising fuel prices.
Gatchalian said the President’s contingency fund could be tapped to provide immediate subsidies to public utility vehicle drivers without waiting for Dubai crude oil prices to breach the $80 threshold.
Under the Pantawid Pasada Program, subsidies are released only when the average price of Dubai crude oil reaches $80 per barrel for a given month.
However, Gatchalian noted that the country has already experienced a series of oil price increases, with diesel and kerosene prices rising for 10 consecutive weeks and gasoline prices increasing for eight straight weeks.
Meanwhile, Senate President Tito Sotto proposed establishing a national petroleum reserve to strengthen the country’s energy security.
Sotto filed Senate Bill 1934, or the proposed Philippine Strategic Petroleum Reserve Act, which seeks to create a state-managed petroleum reserve capable of cushioning prolonged supply disruptions.
The measure would require the country to maintain petroleum stocks equivalent to at least 90 days of national consumption.
It also proposes the construction of reserve facilities nationwide to store crude oil and refined petroleum products, including diesel, gasoline, jet fuel and liquefied petroleum gas.
Senator Francis “Chiz” Escudero also proposed amendments to the TRAIN Law that would automatically empower the President to suspend or reduce excise and VAT on fuel when global oil prices exceed benchmark levels.
Currently, the President cannot unilaterally suspend excise taxes unless Congress passes a law.
While the TRAIN Law provides for the suspension of excise taxes when Dubai crude oil prices reach or exceed $80 per barrel for three consecutive months, Escudero argued that waiting for that threshold could delay relief for consumers during sudden global crises.
“We should not wait for every crisis to pass through Congress before action can be taken. The law must already provide the President with the automatic authority to act when conditions demand it,” he said.
President Ferdinand Marcos Jr. earlier said he plans to seek congressional support for emergency powers allowing him to automatically suspend or reduce excise taxes on petroleum products when global oil prices spike.
Any measure granting such authority would likely be certified as urgent to expedite its passage in Congress.