‘Too early’ to seek fuel excise tax cut
By Justine Irish D. Tabile, Senior Reporter
THE Department of Finance (DoF) said it is too early for the Development Budget Coordination Committee (DBCC) to recommend the reduction of the excise tax on fuel.
However, the DoF will pursue other means to provide relief from high fuel prices, including the procurement of 2 million barrels of oil from the global market to ensure a sufficient buffer stock.
“I think it is probably too early for us to say that the DBCC will recommend to the President to reduce excise taxes on fuel,” Finance Secretary Frederick D. Go said on Tuesday on the sidelines of the Philippine Stock Exchange’s InvestPH Conference in Taguig City.
“We have only entered the 17th day of the war, and Congress is still working on the bill,” he added. “My understanding is that the (House of Representatives) has already passed a bill, and the Senate has a draft.”
The House of Representatives approved on Monday House Bill No. 8418, which seeks to give the President the power to suspend or reduce the excise tax on fuel during national and global emergencies.
Its counterpart bill at the Senate, however, was still being discussed at the plenary level as of March 16.
“The Senate draft is completely aligned with the position of the DoF, so we will be very supportive of the bill that the Senate is coming up with,” Mr. Go said.
The Senate version of the bill gives the President the power to suspend excise tax collection for three months, while the House version specifies six months.
Economists said suspending the excise tax on fuel and reducing the value-added tax (VAT) to 10% are not enough to ease the cost-of-living burdens on households, with the oil price shock expected to cause inflation to spike.
According to the De La Salle University (DLSU) Report of the Philippine Economy for March, written by professors from the DLSU Department of Economics, “the per-barrel price of oil has rapidly climbed over the past weeks, with projections that it may reach $140 — a level that would drastically alter the inflation outlook and amplify the growth constraints.”
“This fuel price shock directly feeds into firms’ production costs, dampening business confidence and contributing to the contraction in capital formation. The cost will be passed on to households,” it added.
Apart from the war’s inflationary impact, it is also expected to physically endanger many overseas Filipino workers in the Middle East and dampen their remittances, which have been estimated at $30 billion.
“Threats to this critical consumption (lifeline) for millions of households compound their already-deteriorating purchasing power due to foreseen inflation spikes and further undermine the role of private consumption in ushering in rapid economic expansion,” it said.
In the report, the economy is expected to grow 2.5% in the first quarter, 3.8% in the second, 4.5% in the third, and 5.9% in the fourth. This will bring full-year growth to 4.19%, below the government’s revised target of 5%-6% gross domestic product (GDP) growth.
The Department of Economy, Planning, and Development warned last week that GDP growth could again fall below 5% if inflation is left unchecked. Economic growth slowed to 4.4% in 2025, the weakest in five years, as the flood control corruption scandal weighed on government spending, investment and consumer confidence.
The DLSU report recognized, however, the steps the government is taking to address the impending impact of the oil shock.
“Several legislative responses have been filed in Congress to mitigate these pressures,” the report said, pertaining to House Bill No. 8418 and the proposal to reduce the VAT rate.
“While aiming to ease household burden and support consumption, the effects of such measures are unlikely to immediately take effect. These policy responses are also not guaranteed to fully offset the inflationary impacts of the oil price shock,” it added.
Mr. Go said the government is pursuing targeted means of intervening in the market to provide immediate relief to the most vulnerable segments of society.
“These include expediting fuel subsidies for transportation, farmers, and fisherfolk,” he said. “We will also be implementing the ‘Libreng Sakay’ program to ease commuting costs. In addition, the budget for assistance to individuals in crisis situations will be released to the public.”
He said that the government is also working with oil companies to stagger their price increases, encouraging energy conservation in offices through remote work, and considering delays to non-urgent programs and capital outlays.
According to Mr. Go, a meeting on Sunday with oil companies discussed ways for the Philippines to access petroleum from markets not exposed to Persian Gulf disruption.
The Philippines gets a significant portion of its fuel from Singapore, where Middle Eastern oil is typically processed, as well as China, whose largest single supplier of crude is Russia.
“The Philippine National Oil Company Exploration Corp. (PNOC EC) will be procuring 2 million barrels of oil from the global markets as a precautionary measure to add to our oil buffer stock,” Mr. Go said.
“The PNOC EC has already started the procurement process and we should be able to procure about 2 million barrels of oil anytime now to dispel fears that we will have an oil shortage,” he added.
Mr. Go said the 2 million barrels, which the government plans to acquire within the week, is equivalent to about 10 days of fuel inventory.
“I believe that they have a lot of offers on the table, so they are just selecting which ones they will procure from,” he added, noting that the prudent thing to do is to buy from multiple sources.
“The primary objective is, of course, to create the additional buffer stock. Also, when you put out a big order into the global market, the belief is you should be able to achieve economies of scale and procure at lower prices,” he added.
He stressed that at the start of the war, the country had over 50 days’ worth of fuel inventory.
“We recognize that things are beyond our control, but we will not be defined by what we cannot change. Our focus is on what we can influence, the reforms that we implement, the programs that we launch, and the decisions we make for the domestic market,” he said.
“We aim to protect Filipinos from external shocks without compromising essential services,” he added.
Meanwhile, he said the crisis has highlighted the urgency of disposing of some government assets.
“The DoF, together with our privatization group and the privatization management office, had a meeting actually very recently to discuss the possible assets that we would like to accelerate its disposal of,” he said.
“The answer is yes. We should accelerate the disposition of assets,” he added.
