Lawmakers, biz groups: Cut VAT, excise on gas, diesel, too
Business groups are pressing the administration to cut excise and value-added tax (VAT) on petroleum products to cushion the impact of rising costs of production and the price of goods and services, arguing that economic gains from suspending fuel taxes would outweigh revenue losses.
Several lawmakers, meanwhile, are seeking an even broader cut in the VAT to include all goods and services.
Using a newly enacted law, President Marcos earlier this week suspended the excise on liquefied petroleum gas (LPG) and kerosene—cooking fuel for many Filipino households.
He left the fuel tax of P5 per liter for diesel and P10 per liter for gasoline, widely used for transportation, untouched. The excise on kerosene is P5.65 per liter and P3.36 per kilogram for LPG.
The Philippine Chamber of Commerce and Industry (PCCI) and the Philippine Exporters Confederation Inc. (Philexport) said that the high fuel prices were eroding business margins and warned that they threaten the survival of small companies—the bulk of business enterprises across the country.
PCCI, the country’s largest business group, said high energy costs have become a “primary bottleneck” to growth, particularly for micro, small and medium enterprises, which make up 99.5 percent of Philippine businesses.
“Continuous fuel price hikes lead to thinner margins, forcing businesses to either cut personnel or risk insolvency,” it said in a statement, noting that logistics costs in the Philippines were among the highest in the region.
Fuel costs account for about 30 to 40 percent of operating expenses while rising transport expenses are driving a 15 percent to 35 percent increase in the prices of basic goods, PCCI said.
In a statement, Philexport said high fuel prices were also chipping away at the competitiveness of Philippine exports.
“Reducing the tax burden on fuel will have a cascading positive effect, lowering operational expenses and ultimately stabilizing prices of goods and services,” Philexport president Sergio Ortiz-Luis Jr. said.
Sen. Bam Aquino on Thursday filed Senate Bill No. 2047 to reduce VAT from 12 percent to 10 percent as fuel prices rise and trigger inflation due to the Middle East war.
Aquino’s bill proposes to amend the 1997 Internal Revenue Code to lower the VAT on petroleum products and other goods and services.
Aquino said that the proposed measure could help cushion the impact of the rising prices of fuel and other commodities, which the Department of Energy (DOE) had projected to last for six months to a year.
He noted that it wasn’t only the poor who were being hit by the crisis but also the middle class, who, however, do not receive direct government aid.
Senators Mark Villar and Erwin Tulfo had filed similar bills in November 2025 and February 2026, respectively.
Villar and Tulfo cited lower VATs in other Southeast Asian countries, such as Indonesia, Vietnam and Singapore, ranging from 9 percent to 11 percent.
Aquino noted that a reduction in VAT would directly lower prices across the board, from basic goods and transport to utilities. It will also help stabilize household consumption and economic activity, he said.
Overall, this will provide “medium- and long-term solutions” as global tensions continue to push up oil prices, he said.
Why limited suspension
Finance Secretary Frederick Go defended the limited suspension of the fuel tax as a “balanced and fiscally responsible approach,” noting that foregone revenues could reach an estimated P136 billion from combined excise and VAT collections.
Marcos’ economic team has also held off on recommending suspending the 12-percent VAT on fuel, arguing that it would mainly benefit oil players. The President has no authority to suspend VAT without legislation.
For PCCI and Philexport, the broader economic impact of sustained business activity, job preservation and stronger consumer demand would offset fiscal losses over time.
“A stagnant economy characterized by shuttered businesses and weakened consumer demand would be far more costly in the long run,” the PCCI said.
Economists, however, pushed back against broad-based tax suspensions.
“The proposed P136 billion revenue loss is real and immediate, while the idea that growth will eventually offset it is uncertain and delayed,” said Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., a professional services company that specializes in taxation.
Many to benefit
Fuel tax cuts benefit a wide swath of consumers rather than target those most affected by the crisis, according to John Paolo Rivera, senior research fellow at the Philippine Institute of Development Studies.
“Broader fuel tax cuts can provide immediate relief to businesses but they are costly and not well-targeted,” Rivera said. “Much of the benefit tends to go to higher income users and fuel-intensive sectors, while the fiscal cost can significantly reduce government resources for priority spending.”
PCCI also urged the government to fully implement Republic Act No. 12316, which allows the President to adjust excise taxes during global oil prices surges. The group also sought the expansion of such mechanism to include a temporary VAT holiday on fuel.
It also proposed tapping proceeds from the Malampaya gas field to form an “energy sovereignty fund” that could serve as a “bridge for the national budget during the tax relief period.”
Ortiz-Luis said a balance must be struck between fiscal sustainability and economic resilience—an outcome he believes is achievable even if the VAT on fuel were suspended.
“Targeted, time-bound relief measures such as the suspension of VAT on fuel are critical to safeguarding economic momentum, supporting exporters, and protecting Filipino consumers from further price shocks,” he said.
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