PCCI seeks suspension of VAT on fuel, accelerate oil exploration

The Philippine Chamber of Commerce and Industry, the voice of business in the country, has called for the expansion of RA 12316 (The Emergency Petroleum Excise Tax Adjustment Act), which grants the President emergency powers to adjust excise taxes when Dubai crude reaches US$80 per barrel, to also include the suspension of value added tax on fuel for a fixed period of six months to one year.

“We urge the Senate to consider expanding this mechanism to include VAT suspension. Since VAT is percentage-based, it acts as a ‘tax on a tax’ during price surges, disproportionately penalizing consumers when global prices are high. Vat suspension will provide an additional layer of relief at the point of importation,” said PCCI President Ferdinand “Perry” Ferrer.

“Government must prioritize the productivity of the private sector as the primary engine of recovery. While the projected ₱136 billion revenue loss for 2026 is a serious concern, a stagnant economy characterized by shuttered businesses and weakened consumer demand would be far more costly in the long run,” he pointed out. Ferrer said the multiplier effect of reduced operational costs for industries and especially Micro, Small, and Medium Enterprises (MSMEs), and the stabilization of consumer prices outweigh the immediate loss in tax revenue.

MSMEs, which comprise 99.5 percent of Philippine businesses, energy and transport costs represent a significant portion of total overhead. “Continuous fuel price hikes lead to thinner margins, forcing businesses to either cut personnel or risk insolvency. Meanwhile, our country already has some of the highest logistics costs in the ASEAN region. Adding high fuel taxes to these costs further erodes the competitiveness of Philippine-made products in the global market,” he said.

Aside from saving the domestic MSMEs, keeping prices of fuel in check helps curb cost-push inflation. Increased fuel costs in transport and trucking have contributed to a 15-35 percent increase in the prices of basic commodities

“As the country navigates the economic fallout of heightened Middle East tensions and global supply chain disruptions, the escalating cost of energy has become a primary bottleneck for domestic growth,” Ferrer pointed out.

He argued that mitigating the impact of high fuel prices is crucial to the survival of MSMEs and industrial competitiveness of the country. This is because fuel is a non-negotiable input for the majority of businesses.

Accelerate oil exploration

“By utilizing the Malampaya Dividend to fund tax relief and aggressively pursuing new discoveries, we can transform this energy emergency into an era of unprecedented energy independence,” he said.

PCCI also urged the government to accelerate oil exploration and create an Energy Sovereignty Fund to earmark 2026 Malampaya royalties to serve as a bridge for the national budget during the tax relief period.

The success of the Malampaya Phase 4 Drilling Campaign provides a unique fiscal “shock absorber” that did not exist in previous years.  “We propose the use of the Energy Dividend from newly discovered indigenous gas fields to offset tax revenue losses,” he said.

The government’s 60 percent share from the MAE-1 and Camago-3 discoveries represents a significant, unprogrammed windfall. We propose that these royalties be earmarked to replenish the Treasury for the “foregone” revenue from fuel excise and VAT suspensions.

Indigenous gas from Malampaya is priced at approximately ₱4.80/kWh, compared to over ₱10.00/kWh for imported LNG. The government should pass these savings directly to the people by removing the VAT layer on top of this lower-cost indigenous energy.

To accelerate oil exploration projects, PCCI cited the need for enhanced incentives and legal shield from local government units and third-party interventions that threaten national energy security. They also called for green lane status to fast-track all environmental and operational permits within 30 days.

PCCI Comparative Economic Analysis