Marcos Jr. signs oil excise tax suspension law

Effectivity date unclear

MANILA, Philippines —  President Marcos signed into law last night a bill granting him the power to suspend or reduce excise tax on petroleum products as part of the government’s initiatives to cushion the impact of soaring fuel prices.

But even after signing Republic Act 12316, the President said he would wait for the “best time” to implement it. RA 12316 amended Section 148 of the National Internal Revenue Code of 1997.

The President may, upon the recommendation of the Development Budget Coordination Committee (DBCC) and in coordination with the secretary of energy, suspend or reduce the excise taxes on fuel under Section 148 when the average Dubai crude oil price based on Mean of Platts Singapore (MOPS) reaches or exceeds $80 per barrel for one month immediately preceding the issuance of the suspension or reduction order.

The suspension or reduction may be applied to specific petroleum products and implemented either as a full suspension or partial reduction of the applicable excise tax rates under Section 148, as may be warranted by prevailing conditions.

Any suspension or reduction would be effective for a period not exceeding three months, provided that the aggregate period of the suspension or reduction shall not exceed one calendar year.

The law states that the excise tax on fuel products shall revert automatically to the rates provided for under section 148, without need for further legislative or executive action, upon occurrence of any of the following conditions, whichever comes first: one week after the one-month average of Dubai crude oil price based on MOPS falls below $80 per barrel as duly certified by the Department of Energy, or after three months.

The authority granted to the President under the law will be exercised only until Dec. 31, 2028.

The President, through the DBCC and in coordination with the DOE, shall submit to the House of Representatives and the Senate a report on the following: the factual basis and policy goals for the suspension or reduction of excise taxes; estimated forgone revenues, including affected social benefits for different household deciles and the expected impact on inflation and fuel prices, a cost-benefit analysis, an assessment of possible market distortions, leakages or unintended consequences arising from the suspension or reduction of excise taxes, and other economic activity.

Regular reporting

During the suspension or reduction of excise tax under section 148, oil companies shall submit to the DOE monthly information on the cost components of the price of petroleum products sold. The DOE shall submit such monthly information to the DBCC and Congress.

In an address delivered earlier yesterday, Marcos allayed concerns over the country’s oil supply, saying there would be a “flow of oil” even after the 45-day supply is consumed.

“Although we cannot be assured right now of the supply, we can be sure that at least for 45 days we will be alright. I think that we can be fairly confident – we can be confident that after the 45 days, we still have (oil supply that) already arrived here in the Philippines,” the President said.

“We will (already have) a flow of oil, not just one delivery, not just two deliveries but a flow of petroleum and petroleum-related products,” he added.

Marcos said his administration has ensured that the oil contracts it signed are honored by the suppliers. The government came up with new systems to ensure that the country would have a steady oil supply, he added.

“We have not only gone to the oil suppliers, the traditional oil suppliers, we have tried to explore other sources that are not affected by the war that is ongoing in the Middle East,” the Chief Executive said, adding that the supply deals were made possible by the Philippines’ “good relations” with its partner countries.

Asked if the government would temporarily take over oil firms, Marcos replied: “We don’t want to get into that discussion.”

The Downstream Oil Industry Deregulation Act of 1998 allows the DOE to temporarily take over or direct the operations of entities engaged in the downstream oil industry in times of national fuel emergency.

Special session

Senators, meanwhile, are prepared to make themselves available should President Marcos call for a special session to address the country’s energy crisis, Senate President Vicente Sotto III said yesterday.

“I will (cancel break) if needed. Not at the moment but I’m sure they are aware of developments in the country,” Sotto told reporters.

Speaker Faustino Dy III also said the House of Representatives is prepared to move with urgency to help the government deliver concrete relief measures in the face of the energy crisis.

“The House will move with the same urgency, through targeted interventions, close oversight and real relief for our people,” Dy said in a statement.

“In moments like this, unity in government is not optional. It is essential to protect our people and keep the nation moving forward,” he pointed out.

Navotas Rep. Toby Tiangco and Caloocan Rep. Edgar Erice have called for a special session after the Holy Week and the enforcement of cost-cutting measures at the House premises.

“Congress cannot be on break while the people are suffering. This is not the time for recess – this is the time for action,” Erice said in a joint statement with Tiangco.

For Senators JV Ejercito and Loren Legarda, President Marcos’ decision to declare a state of national energy emergency is a welcome move but is long overdue.

“It’s not too late – it’s late. But we need to double. The agencies need to double time,” Ejercito told reporters at the Kapihan forum at the Senate.

Legarda, in a statement, said  Marcos’ declaration was an “overdue recognition of what the people have been saying for weeks: that we are already in a crisis.”

“By itself, a declaration of a state of national energy emergency will not protect Filipino families from rising fuel prices, higher food costs, heavier transport expenses and the mounting burdens on our farmers and fisherfolk,” Legarda stated.

Lack of preparation

Also at the Kapihan forum, Sen. Sherwin Gatchalian expressed concern over the executive branch’s failure to craft a comprehensive national contingency plan nearly a month into the Middle East conflict.

“With what happened in the Strait of Hormuz, the government should have anticipated supply issues and when I say ‘anticipate,’ it should involve the drafting of a national contingency plan because our point here is, the public and the legislature should be guided in dealing with every scenario,” he said in Filipino.

The Armed Forces of the Philippines, for its part, said it acknowledges that Marcos’ declaration “has a direct bearing on our mandate to help ensure energy security, national stability and the overall welfare of the Filipino people.”

“In this light, the AFP underscores its full collaboration with concerned government agencies and its unwavering support to all national government initiatives and directives addressing this situation,” AFP spokesperson Col. Francel Margareth Padilla said.

The Philippine National Police said it is implementing austerity measures in response to the President’s directive.

“We have been optimizing our resources based on the existing policies and additional measures that include regular monitoring of our fuel and power consumption,” PNP chief Gen. Jose Melencio Nartatez Jr. said in a statement.

Kidapawan Bishop Jose Colin Bagaforo said the President’s placing the country under a state of national energy is “the call of the times, that we stop the uncontrolled price increase.”

“It is never too late, anything that is good for our country. Maybe, it just happened that they were studying it very well but I would not say that (the issuance of EO 110) is too late,” he said.  –  Neil Jayson Servallos, Alexis Romero, Jose Rodel Clapano, Emmanuel Tupas, Michael Punongbayan, Evelyn Macaiera, Emmanuel Tupas