The Philippine government could forgo as much as P272.83 billion in revenues in 2026 if excise taxes and value-added tax (VAT) on fuel imports are suspended, according to estimates presented by the Bureau of Customs (BOC) during a Senate hearing on March 11.
The projected shortfall reflects P160.43 billion in foregone excise taxes and P112.40 billion in lost VAT collections, underscoring the fiscal trade-offs tied to proposals aimed at cushioning consumers from rising fuel costs.
The policy debate comes as global petroleum prices begin to climb again. Government data cited at the hearing showed early March price movements rising by roughly USD1.011 per liter for diesel, USD0.75 for gasoline, and USD0.899 for kerosene, adding pressure on policymakers to consider tax relief measures.
Finance officials, however, cautioned that suspending fuel taxes could significantly weaken government revenues.
Department of Finance Undersecretary Karlo Adriano said that temporarily suspending fuel excise taxes from May to December 2026 alone would already reduce collections by around P121.4 billion.
The fiscal impact compounds because excise taxes form part of the VAT computation base.
“Because excise taxes are included in the VAT base, the government would also lose around P14.6 billion in VAT, bringing the total estimated revenue loss to roughly P136 billion for that period,” Adriano told lawmakers.
Still, oil prices themselves could influence the final revenue outcome. Higher crude prices typically raise the VAT base, potentially offsetting some of the losses.
Government projections suggest that average crude prices of USD80 per barrel could yield an additional P16 billion in VAT collections, while USD100 per barrel could generate as much as P37 billion in extra VAT revenue.
The sensitivity of excise taxes to fuel consumption remains stark. Finance officials estimate that every P1 reduction in diesel excise tax could erase P9 billion to P10 billion in revenue, while a P1 cut on gasoline excise tax could trim P5 billion to P6 billion from government coffers.
The numbers illustrate a familiar dilemma for policymakers. Will they choose tax relief that could ease pump prices or ignore public outcry for relief given the action’s steep fiscal bill.
