Excise tax on LPG, kerosene suspended

By Chloe Mari A. Hufana, Reporter

PRESIDENT Ferdinand R. Marcos, Jr. on Monday said he approved the suspension of excise taxes on liquefied petroleum gas (LPG) and kerosene to soften the impact of rising fuel costs on households, while leaving levies on gasoline and diesel unchanged.

The selective suspension is expected to provide modest relief to household budgets but may have limited effect on transport costs and inflation, which are more sensitive to diesel prices.

“We have reduced the tax on petroleum products that are directly used in the daily lives of our countrymen under the power given to us by law… meaning lower costs for cooking and the daily needs of each family,” he told a briefing in Filipino.

Mr. Marcos said the reduction is equivalent to P3.36 per kilo of LPG or about P37 per tank and P5.60 per liter of kerosene.

LPG prices are currently around P1,000 to P1,600 per tank, while kerosene prices are around P154 to P177.19 per liter.

Republic Act No. 12316, which took effect on April 13, granted the President emergency powers to cut or suspend excise taxes on fuel products.

Mr. Marcos said the Unified Package for Livelihoods, Industry, Food, and Transport (UPLIFT) Committee will still convene on Tuesday morning to decide on the possible reduction or suspension of excise taxes on gasoline and diesel.

“What we will do [on April 14] is to make sure… [we have] the supply of oil, food products and all the other raw materials [needed to] continue the running of the economy,” the President said.

The country is under a year-long energy emergency as the Middle East crisis threatens its fuel supply. Mr. Marcos established the UPLIFT Committee, an inter-agency body responsible for managing the government’s response to the war’s impact on the economy.

Excise taxes are capped at P6 a liter for diesel and P10 a liter for gasoline and other petroleum products, with a 12% value‑added tax applied broadly to goods and services.

FOOD SUPPLY
Meanwhile, Mr. Marcos said he ordered the Department of Agriculture (DA) and the Tariff Commission to lessen duties on imported food to make them cheaper for Filipino consumers, but he did not expound on the specific rates.

“We will protect consumers, farmers and the industry. That is the balance we are looking for because… the economy is a complicated system,” he added.

The DA and local governments are also expected to buy from local farmers.

“The government will catch this, so the harvest is not wasted, our farmers do not lose money, and our consumers benefit,” he said, adding the government will also expand its flagship Benteng Bigas Program.

The government also moved to expedite the processing of permits, such as the Sanitary and Phytosanitary Import Clearance  and the Certificate of Necessity to Import, to lessen costs.

Mr. Marcos also ordered the removal of fees at fish ports.

The Philippine Ports Authority also set the “RoRo” (roll-on, roll-off) terminal fee for vessels carrying agricultural products to P1.

“Our goal is to maintain adequate supply, prevent price increases, and ensure that our countrymen continue to earn a living,” Mr. Marcos said.

John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said the impact of the excise tax suspension on kerosene and LPG will be modest and targeted rather than broad-based.

Mr. Rivera said the move can bring immediate relief to households but the overall effect on inflation and total household spending will be limited.

“Global price movements will still be the dominant driver of local prices. So, it helps at the margin especially for vulnerable households, but it is not enough on its own to significantly offset broader cost-of-living pressures,” he said via Viber.

TAX CREDIT SCHEME
Meanwhile, lawmakers are pushing a tax credit scheme to allow immediate fuel price cuts, challenging the Department of Finance’s (DoF) position that suspending excise taxes may only apply to future imports.

Marikina Rep. Romero Federico “Miro” S. Quimbo, who heads the Committee on Ways and Means, said the government should ensure the public feels the relief “right away.”

He proposed at a House of Representatives hearing on Monday that fuel companies be granted tax credits for excise taxes already paid on existing inventories so they could cut pump prices without waiting for new shipments.

He estimated potential reductions of about P10 per liter for gasoline, P6 for diesel and P4.50 for kerosene as early as the day after a presidential directive.

The proposal runs counter to the DoF’s position that applying tax relief to fuel already in the country would be difficult.

“It will be hard with regard to administrative feasibility, the removal of the excise stocks, the inventories that are here in the Philippines,” Finance Undersecretary Rolando T. Ligon, Jr. told the hearing. The direction they are looking at is to apply it to “upcoming importations.”

Mr. Ligon said implementing tax relief on fuel already in storage poses technical and administrative challenges, citing the complexity of adjusting taxes on existing inventories.

He said once a directive is signed, implementation could take effect within one to two days through issuances from the Bureau of Customs.

Mr. Quimbo also asked the DoF to explain why a tax credit scheme would be unworkable, noting that the Bureau of Customs maintains records of inventory and tax payments.

Discussions on fuel tax measures come as volatility persists in global oil markets amid tensions linked to the Strait of Hormuz and the US-Israel war on Iran.

Energy Undersecretary Alessandro O. Sales said diesel prices are expected to drop by P20 to P21 per liter on Tuesday due to market movements, but warned that conditions remain unstable.

He said prices could climb to P130 to P170 a liter if hostilities resume, while a longer-term resolution could bring diesel prices down to P75 to P90 a liter over several months.

VAT REMOVAL UNLIKELY
Meanwhile, Mr. Marcos rejected calls to cut or suspend value-added tax (VAT) on fuel products, saying revenues from VAT collection are needed to fund aid programs for the public.

“If we take away the VAT on petroleum products, it will only help the petroleum market. What we need is funding to help the entire society,” he said.

“Right now, the cost-benefit analysis between the VAT collections and the benefit to people, ordinary people, still favors that we collect VAT and we use the extra funds.”

The DoF also expressed reservation regarding proposals to reduce the VAT on fuel to 10% from 12%.

Mr. Ligon said the removal or reduction of the VAT on petroleum products would result in a revenue loss of approximately P120 billion, further straining the national budget.

Joseph J. Capuno, undersecretary at the Department of Economy, Planning, and Development, said the Executive branch favors targeted subsidies over a uniform reduction in VAT.

“Targeted subsidies rather than uniform reduction in taxes that will compromise our ability to raise revenues to support those subsidies,” Mr. Capuno said, noting that broad tax cuts benefit all segments of the population rather than just the vulnerable.

In response, Cagayan de Oro Rep. Rufus B. Rodriguez called for a temporary reduction of the VAT to 10% only until the market price of oil drops below $80 per barrel, calling the current situation as a pressing emergency.

Mr. Rodriguez also pushed for a joint session of Congress to enact a “Bayanihan 3” package to address the energy crisis, similar to the one implemented during the coronavirus pandemic. — with Erika Mae P. Sinaking