Marcos suspends tax only on LPG, kerosene
President Marcos announced the suspension of the excise on liquefied petroleum gas (LPG) and kerosene on Monday, the first day of the effectivity of the law granting him powers to reduce or completely cut the tax on fuel products amid soaring prices.
The public, however, would need to wait longer whether he would fully slash or merely lessen the excise on diesel and gasoline, which runs public and private transportation, and other petroleum products.
Mr. Marcos was lukewarm to suggestions for the government to also remove the 12-percent value-added tax (VAT) to further bring down fuel prices, pointing out that the VAT revenue is being used to fund targeted government aid for the most vulnerable sectors affected by the energy crisis.
“If we take away VAT on petroleum products, it will only help the petroleum market,” he said at a press conference.
“We need funding to help the entire society. Some people are complaining that we are only helping transport workers. How about the other sectors? So with the additional funding we get from the VAT collection, we will use that to provide assistance to other sectors,” the President added.
But Malacañang had also called on Congress to pass legislation that would give the President authority to suspend the VAT on fuel products.
“The President has no authority to suspend VAT because there is currently no law granting such power. So there may be a misconception, and it might be reaching the transport sector-drivers and operators that with just one click, the President can suspend VAT,” Palace press officer Claire Castro said at an earlier press briefing.
Nevertheless, Mr. Marcos said he remains open to all possible options.
“We will examine it [proposals to remove VAT]. Indeed, there is nothing that we are not looking at as a possible option,” he said.
The President on March 25 signed Republic Act No. 12316, allowing him to suspend or reduce the fuel excise if the Dubai crude oil price reaches or exceeds $80 per barrel for one month.
Mr. Marcos said he has ordered the removal of P5.65 per liter of excise on kerosene.
The excise on LPG at P3.36 per kilogram was likewise eliminated, translating to almost a P37 reduction for an 11-kilogram LPG cylinder tank used for household cooking.
“This means lower expenses for cooking and for the daily needs of every family,” he said.
Meanwhile, the fate of the excise on diesel and gasoline will be discussed at the third interagency Unified Package for Livelihoods, Industry, Food, and Transport (Uplift) committee meeting today (April 14).
The President said the meeting would take up strategies to keep prices down and ensure an adequate supply of oil, food products and raw materials to keep the economy running, while there are no signs of the Iran war ending soon.
Transport groups and other stakeholders are calling on Mr. Marcos to fully suspend the excise tax on diesel and gasoline to bring down pump prices, which have increased by double digits for six consecutive weeks.
If he does this, prices of diesel, which powers trucks and public utility vehicles, is expected to drop by P10 per liter, while prices of gasoline will be pulled down by P6 per liter.
The Department of Finance (DOF) had warned earlier that suspending the excise on fuels from May to December would result in at least P136 billion in revenue loss.
Tax on stockpile
Lawmakers, on the other hand, have scolded the DOF for not exploring the possibility of including existing fuel supply stock in the suspension of the excise.
During a hearing by the House of Representatives’ Legislative Energy and Development (LEAD) committee on Monday, Marikina Rep. Miro Quimbo questioned Finance Undersecretary Rolando Ligon Jr. regarding updates on the proposed suspension.
When Ligon said they are awaiting updates from the Office of the President (OP) and that any suspension would apply only to incoming fuel shipments and not to existing inventory, Quimbo asked why the DOF could not just refund the excise already paid by the oil companies.
“So the supplies available already, you do not intend to include that in the implementation of excise tax suspension on pump prices?” Quimbo asked in Filipino.
“Not anymore. It will be hard, with regards to administrative feasibility, to recall the excise tax for inventories already here in the Philippines,” Ligon replied.
“We do not want you to take that back. All we want is for you to just give them credit for the amount that they have advanced, and once the suspension is lifted, we can start applying that. Can’t we do that? You have an inventory coming from the BOC (Bureau of Customs) of the amount that they have paid,” Quimbo countered.
According to Quimbo, refunding the excise would also allow the government to check which companies are evading the compulsory payment of the levy, which currently stands at P10 per liter of unleaded gasoline and P6 per liter of diesel.
Ligon said the DOF will consider Quimbo’s proposal, but the Marikina solon stressed that the agencies have been deliberating on this for a long time.
Oil companies’ side
At least two representatives of oil companies in the country noted that they not against a tax suspension that includes existing fuel inventory, as long as the implementing rules and regulations (IRR) will be finalized soon.
Raffy Capinpin, executive director of the Philippine Institute of Petroleum, said the only difficulty will be how the government can identify the stock fuel from private players across the country.
The group includes Petron, Shell, Chevron, PTT, and Isla Petroleum, while the Independent Philippine Petroleum Companies Association lists Insular Oil, Petrogas Ventures, FilOil, Seaoil, UniOil, and Eastern Petroleum as members.
Independent Philippine Petroleum Companies Association president Tanya Samillano likewise said they see no problem with Quimbo’s proposal as long as the IRR is finalized.
Three-month duration
RA 12316 states that any suspension or reduction of the fuel excise can only last up to three months, but not more than one year in total.
The taxes shall also automatically return to their original rates either one week after the one-month average Dubai crude oil price drops below $80 per barrel or after three months, whichever comes first.
The President’s power to temporarily suspend or reduce the excise on petroleum products shall only be exercised until Dec. 31, 2028.
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