In layman’s language, the word “excise” is a transitive verb that means to remove or to cut off. But in public finance, it means an internal tax imposed on the manufacture, sale or consumption of a commodity. In the aftermath of the latest Middle East (ME) conflict, there have been renewed demands to suspend, if not cut, the excise taxes on the country’s crude oil and petroleum products.
The world price of crude oil breached $110 per barrel as the ME conflict expanded to known US allies like Dubai and other nearby oil-producing Gulf states. The subsequent closure by Iran of its controlled Strait of Hormuz further constricted the world’s oil shipments passing through it.
For the past several weeks now, there have been unprecedented spikes in the prices of refined oil products. As of last week, diesel price rose to more than P140 per liter. Before it could hit the roof, thank God the US, Israel and Iran agreed to observe a ceasefire for the next two weeks. Immediately thereafter, the price of Brent crude dropped to $96 per barrel.
So it was with great relief to welcome a rare oil price rollback this week. But even before the ME conflict erupted, there have been weekly increases in the domestic pump prices of gasoline, diesel, liquefied petroleum gas (LPG) and other refined petroleum products since January this year.
Calls to suspend excise taxes on oil products reverberated across the halls of Congress all the way to Malacañang. It reached higher decibels at the height of the conflict, while there was a seeming state of denial of a brewing crisis in our country.
Acting with urgency, both chambers of the 20th Congress were able to produce a hastily crafted legislation that granted President Ferdinand “Bongbong” Marcos Jr. (PBBM) “special powers” to enable him act with dispatch on the ME conflict. The “special powers” bill was not even in the common priority measures list of the Legislative-Executive Development Advisory Council (LEDAC).
Nonetheless, Congress approved this emergency bill before they adjourned for their month-long Lenten recess last March 20. It was signed into law by PBBM as Republic Act (RA) 12316 on March 25, 2026. Among other things, RA 12316 gave the President “special powers” but limited authority to temporarily suspend or reduce excise taxes on petroleum products on “trigger mechanisms” embedded in this law.
Under RA 12316, the President can suspend or reduce fuel excise taxes if the average Dubai crude oil price reaches or exceeds $80 per barrel for at least one month. But the Chief Executive can only do so based on recommendations from the Department of Energy (DOE) and the Development Budget Coordination Committee (DBCC).
The same law also provided the duration of any suspension or reduction of the excise tax is limited to three months at a time, with a maximum total period of one year. It further provided this authority is valid until Dec. 31, 2028. However, RA 12316 mandated an “automatic reversion” of the existing tax rates to those prior to the ME conflict. The excise taxes will automatically return to their original rates one week after the average price of Dubai crude oil drops below $80 per barrel, or after the three-month period expires, whichever comes first.
In the Philippines, an excise tax of P10 per liter is imposed on gasoline; P6 per liter on diesel and P5 per liter on kerosene under the 2017 Tax Reform for Acceleration and Inclusion Law (TRAIN) Law of 2019, or RA 10963. This is on top of the 12 percent value added tax (VAT) charged to consumers on the pump prices of refined oil products.
The TRAIN Law, however, also already empowered the President to suspend or reduce these taxes if the Dubai crude oil price exceeds $80 per barrel.
Actually, PBBM is authorized by no less than our country’s 1987 Constitution to suspend excise tax on oil products. If he wants to act decisively, the President can invoke his constitutional powers to amend existing tariff and tax laws whenever Congress is in recess, or not in session. The 20th Congress will resume sessions on May 4 yet.
Malacañang announced last week the DBCC has already convened and submitted its recommendations to the President on the energy-related emergency measures, including this excise tax suspension or reduction as provided under RA 12316. But Malacañang cited mandated requirements – any new law will take effect only after 15 days of publication in the Official Gazette or in any newspaper of national circulation. So RA 12316 is effective already as of today.
Methinks PBBM has been deliberately stalling to decide one way or the other. Along with his constitutional powers, PBBM has the TRAIN Law and now, RA 12316.
There is nothing wrong if PBBM is hemming and hawing on excise tax relief. The President obviously is giving more weight to the significant revenue losses, estimated to be around P136 billion to P300 billion annually, of foregone taxes depending on the scope and duration of the suspension. His economic managers also warned against populist demands by legislators and other do-gooders pressing the government to likewise suspend the 12 percent VAT on our gasoline/diesel purchases. If removed even temporarily, revenue losses were placed at P210 billion for the rest of the year.
In lieu of excise taxes, economic managers have succeeded to convince PBBM to grant “targeted subsidies” from fuel to cash or ayuda payouts to the most affected and vulnerable sectors like public transports operators and drivers, farmers and fisherfolk, overseas Filipino workers. For now, these subsidies being announced by PBBM were crafted by his committee on UPLIFT, or Unified Package for Livelihoods, Industry, Foods and Transport.
The Department of Budget and Management disclosed as much as P238 billion is available in the 2026 Congress-approved budget to bankroll intervention measures to mitigate impact of the ME conflict.
So is there a need to excise the excise tax or not? That still remains a question mark.