Senate eyes possible suspension of 12% VAT on fuel products
Senators are pushing for a reduction or the total suspension of the 12 percent value-added tax on fuel products as the nation grapples with double-digit price hikes in recent weeks.
Sen. Bam Aquino urged energy officials to consider more measures to reduce pump prices, noting that the Senate had already expedited the enrolled bill to suspend fuel excise taxes. He also emphasized that VAT makes up a significant portion of fuel costs.
"Napag-usapan na natin 'yung VAT. It is 12 percent of the price of fuel at the gas station. Is that a possibility na i-suspend din natin 'yung VAT? Kasi kung 12 percent 'yan ng P120, eh 'di ang laki niyan agad. That's what, P14 to P15 right away," Aquino said.
"Let me tell you for the record na handa ang Senadong ipasa ang repormang 'yan kung kinakailangan. We will, I think... go back and have a special session if needed if we need to do reforms on the VAT," Aquino said, adding that even if the Middle East conflict were to end tomorrow, it could take three to six months for global fuel prices to stabilize.
For their part, Department of Energy Undersecretary Felix Fuentebella said talks are ongoing, but officials are more inclined to tweak the tax rate instead of fully suspending it due to complexities in the supply chain.
"It's more of having a different rating; it's not suspending because there's a supply chain we have to note when we're talking about VAT. Probably a zero rating or a lower rating for consideration of our economic managers," Fuentebella explained.
Meanwhile, the Department of Economy, Planning, and Development warned senators of a possible economic slowdown if both excise and value-added taxes on fuel are removed or reduced.
DepDev Secretary Arsenio Balisacan said that while lowering taxes on gasoline, diesel, and other fuels could ease inflation by reducing transport and travel costs, it may also result in revenue losses and potentially affect the country’s credit rating, noting that removing VAT would have a significant impact on gross domestic product.
“Regardless, it will cause the national economy to slow down even more. So that’s the issue. As we look into improving the fiscal resources support system, we can also identify potential sources of revenue so that we can mitigate the negative effects on overall spending,” Balisacan said.
He also pointed out that imposing a total deployment ban and bringing overseas Filipino workers home would significantly reduce remittances, which could, in turn, slow economic growth.
In response to the current crisis, DepDev suggested expanding the country’s energy mix to include nuclear and renewable sources, as well as reinforcing and securing supply chains.
Other measures include sustaining targeted subsidies to farmers and fisherfolk; promoting energy conservation practices; and preventing and penalizing hoarding, profiteering, and other collusive practices.
On March 24, President Ferdinand "Bongbong" Marcos Jr. declared a state of national energy emergency. He also ordered the adoption of a Unified Package for Livelihoods, Industry, Food, and Transport for affected sectors. The national energy emergency will stay in effect for up to one year, unless Marcos decides to extend it or end it sooner. (With reports from Neil Jayson Servallos and Marc Jason Cayabyab)
