Effective

When fuel prices spiked after Iran was attacked, we heard the usual suspects air the worn-out populist demand that government withdraw revenue measures imposed on energy products.

This might be a popular call. But it is highly impracticable – even for a government starved for public approval.

We simply do not have the fiscal space, given our outstanding debt and our chronic budget deficits. Taxing fuel is a lucrative source of revenue for a government constantly short on funds. Government is absolutely reliant on this source. Without it, we might not even be able to service our debt, let alone access more financing. Brutal austerity measures will need to be imposed – at great political cost.

It is true that fuel is more heavily taxed in this country. This is the reason Filipinos pay more for fuel than most of our neighbors. It is also the reason our economy was among the worst affected during the last round of fuel price escalation. Our high inflation rate is caused principally by rising transport costs.

The heavy taxation on fuel produced an ugly underside. It encouraged fuel smuggling. For some fuel retailers, smuggling was precisely their business model for profitability.

In September 2019, pursuant to the Tax Reform for Acceleration and Inclusion (TRAIN) law, government initiated the fuel marking program. This was part of a larger effort to combat fuel smuggling, fuel adulteration and tax evasion.

The beauty of the fuel marking program is that it is largely funded by the oil importers themselves by way of a surcharge. Using newly available technologies, the fuel marking program strengthened revenue protection, promoted fair competition within the petroleum industry and reinforced public confidence that tax laws are being enforced consistently. Consumers are protected from substandard fuel. Legitimate oil companies are protected from unfair competition.

The operational costs of fuel marking and authentication are largely funded through marking fees charged to the industry. Government agencies are mandated by law to exercise enforcement and oversight functions.

This program reflects an efficient public-private implementation model. The Department of Finance, through the Bureau of Customs and Bureau of Internal Revenue, performs the core mandate of enforcing the law. Our revenue officers regularly conduct inspections and accompany accredited field testing teams. It is part of their regular enforcement responsibilities to identify unmarked or illicit fuel in the marketplace.

Government strengthened revenue protection without creating another publicly funded bureaucracy. The program is run using internationally recognized authentication technologies and in close coordination with legitimate industry stakeholders. If only this could be replicated in other industries, such as steel manufacturing, where public safety is often put at risk by substandard products making their way to the open market.

Fuel marking is cheap and effective. It achieves both consumer protection and revenue protection in one blow, since it is easy to identify unmarked fuels and take these out of the market.

The impact of the fuel marking program is dramatic. Before its implementation, declared fuel volumes represented only about 30 percent of projected fuel consumption. This means that smuggled fuel ran up to 70 percent of total volume. Smuggling was lucrative indeed – and injurious to public safety.

By the end of 2025, more than 113 billion liters of fuel had been marked and over P127 trillion in duties and taxes had been collected from marked fuel. This demonstrates the scale and reach of the program’s implementation. The numbers do not lie.

According to official Fuel Marking Program data, as of Dec. 31, 2025 fuel duties and taxes raised about P247 billion for the year. More than 21 billion liters of fuel were monitored under the program. This represents one of the strongest performances since the program was introduced. It reflects the scale of implementation achieved by government enforcement agencies.

Since the implementation of the fuel marking program, annual fuel revenues consistently exceeded P230 billion. This happens despite the fact that revenue performance is influenced by many fluctuating factors: the level of economic activity, fuel demand and fuel prices. This enshrined the program as a reliable source of government revenues.

Since the rollout of field testing activities in 2021, authorities have tested more than 101,000 fuel samples across 21,000 locations nationwide. Compliance rates improved from 43 percent during the initial phases to approximately 85 percent by 2025. This indicates significant gains in market compliance and deterrence.

The tax revenues are not a mere accounting exercise. Every peso recovered from illicit trade improves government’s ability to deliver programs that improve the quality of life of its citizens.

The program encourages responsible corporate behavior. It protects legitimate industry players from unfair competition. It clears the market of corporate pirates out to make a quick buck from peddling illicit products.

Most important, the program protects every vehicle owner from wrongly classified fuel that could ruin their engines and put their safety at risk. Consumers can now fill their tanks with confidence that the product they get is exactly as advertised.

The fuel marking program is effective because it is simple and it relies on the best available technologies. It is a program that is difficult to corrupt. Unmarked fuels are simply confiscated and disposed of.

We need more elegant programs such as this one to raise the quality of governance in this country. That quality of governance, we know, has been quite problematic of late.