House OKs bill allowing Marcos to tweak excise tax on fuel on 2nd reading

The House of Representatives on Wednesday passed on second reading a bill authorizing President Ferdinand R. Marcos, Jr. to suspend or cut excise taxes on fuel and other petroleum products.

This comes a day after the House Committee on Ways and Means first took it up as lawmakers aim to equip the government with tools to rein in surging oil prices.

In a voice vote, lawmakers approved House Bill (HB) No. 8418, which sought to provide the President with the power to suspend or reduce excise taxes on petroleum products during national and global emergencies for no more than six months.

The measure would allow the government “to respond promptly to extraordinary fuel price volatility and stabilize domestic fuel prices during the period of severe economic disruptions.”

The bill’s approval comes as the Iran war stretched into its 12^th day, with the conflict driving oil prices higher after Tehran choked off energy shipments from the Middle East sailing through the Strait of Hormuz, a vital waterway where a fifth of global oil and gas supplies pass.

As a net importer of oil, the Philippines is highly sensitive to sharp fluctuations in global oil prices.

Under the bill, the President may suspend or reduce the collection of excise taxes on petrol if the average Dubai crude oil price based on Mean of Platts Singapore benchmark reaches or exceeds USD 80 per barrel for a month preceding the issuance of the suspension or reduction order. The Development Budget Coordination Committee will have to give the recommendation to the President.

Any order suspending or reducing excise taxes due to emergencies or calamities must be certified by the Energy secretary, confirming that pump prices have surged “extraordinarily” as a result of the calamity, the bill read.

“The suspension may be applied to specific petroleum products and may be implemented either as a full suspension or partial reduction,” the measure said.

The Philippines imposes an excise tax of PHP 10 per liter on gasoline, PHP 6 per liter on diesel and PHP 5 per liter on kerosene under the 2017 Tax Reform for Acceleration and Inclusion law. It previously allowed the government to suspend the collection of excise tax on petrol when world oil prices reach USD 80 per barrel for three straight months, but that provision lapsed six years ago.

Any suspension or cut in the fuel excise tax rate could be extended beyond six months through a joint congressional resolution, according to HB No. 8418. Any extension cannot last longer than a year, it added.

The bill also requires the President to submit to Congress within 15 days of issuing such an order a “factual basis” for halting or cutting the excise tax of petrol, including estimates of foregone revenue and the impact on inflation, fuel prices and economic activity, with monthly reports to follow.

The President may only suspend or reduce excise tax collections on fuel products until Dec. 31, 2028, it added.

During the plenary, Marikina Rep. Romero “Miro” S. Quimbo, who heads the House Committee on Ways and Means, said lawmakers opted to give the President power to suspend fuel excise taxes until 2028 so they would have standby authority to quickly mitigate oil crises.

“We do not know how long wars in the Middle East will last,” he said in Filipino.

Projections from the Finance department showed suspending excise tax collections could result in PHP 136 billion in foregone revenue, which may further widen the government’s budget deficit and raise the country’s debt.

Department of Economy, Planning, and Development Secretary Arsenio M. Balisacan had said revenue losses from the suspension of excise taxes on petrol could reach PHP 43.3 billion if the suspension lasts three months, and PHP 106 billion if extended until September.

“The loss of government revenue, even if painful, will not immediately bring down our economy,” Mr. Quimbo said. “This is for the well-being of the people.”

Funding for government programs, particularly aid for groups vulnerable to the Middle East conflict, will take an initial hit under the proposal, with the impact on state finances expected to deepen the longer the war drags on, said Leonardo A. Lanzona, an economics professor at the Ateneo de Manila University.

“The key is how long this crisis will be,” he said in a Facebook Messenger chat. “If this is short, the excise suspension can provide some temporary but mainly marginal relief.”

“But if the crisis becomes longer, the negative effects of reducing or suspending the excise tax will be significant,” he added.

John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said the government should pursue targeted tax relief instead of sweeping measures, warning broad tax cuts could widen the budget deficit.

“The best response is to limit the tax relief to periods of extreme oil shocks, pair it with spending reprioritization, and strengthen collection efficiency in other areas such as value-added tax, customs and digital taxation,” he said in a Viber message. “It would also help to focus support on the most affected sectors such as public transport and agriculture rather than subsidizing all fuel users.” — Kenneth Christiane L. Basilio, Reporter