IMF warns fuel tax cuts favor upper-income households

Any suspension of excise taxes on gasoline and diesel would only benefit upper-income households, despite the waiver of such taxes on liquefied petroleum gas (LPG) and kerosene for the rest of the year, according to representatives of the International Monetary Fund (IMF).

At a press conference following the IMF’s annual consultation visit to the country, IMF Research Department chief of the Commodities Unit and Philippine mission leader Andrea Pescatori said suspending excise taxes on gasoline and diesel, the two most commonly used forms of fuel, would have disproportionate effects across income groups.

“We do not recommend to mute the signal for gasoline because, in part, the money [should be] progressive and the high income households that can afford to pay higher gasoline prices will also benefit,” he said, describing the idea as “not fully progressive.”

Last Friday, President Ferdinand R. Marcos Jr. signed Executive Order (EO) 125 ordering the suspension of excise taxes on kerosene and LPG.

Under the EO, the excise tax rates will “automatically revert to the rates prescribed under Section 148 of the NIRC” upon whichever comes first: one week after the one-month average Dubai crude price falls below $80 per barrel, as certified by the Department of Energy, or three months after the order takes effect.

The Bureau of Internal Revenue on Monday confirmed the implementation of the renewed suspension, which should run until the end of the year if oil prices remain elevated.

Social component

Pescatori said the decision to suspend excise taxes only on LPG and kerosene may have a social component.

“It seems that those are used mostly by the low income segment of the population, and also rural areas. It’s important in agriculture,” he said.

Pescatori noted that the problem extends to other countries that have likewise been affected by the broader effects of this year’s energy shock, which continues to cloud the global economic outlook.

“If every country introduces or cuts taxes, introduces subsidies to all fuels, then there is no incentive to cut fuel consumption,” he said.

Similar remarks by DoF Sec. Go

Finance Secretary Frederick Go has made similar remarks regarding the suspension of gasoline and diesel excise taxes, noting similar disproportionate effects in favor of upper-income individuals.

“If you remove taxes on diesel and gasoline, it will not be progressive,” he said at a recent Senate hearing.

“The wealthy are the ones who use the most diesel and gasoline. If we removed the taxes for everyone, the ones who would benefit the most would be the wealthy, because they are the ones who use [diesel and gasoline] the most,” Go added.

LPG and kerosene had previously been covered by a three-month excise-tax suspension earlier this year. President Ferdinand R. Marcos Jr. said in his 2026 State of the Nation Address that the government had suspended the taxes on the two products as part of measures to cushion consumers from elevated oil prices, which had since lapsed after the mandated 90-day period.