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SOURCE: Press and Public Affairs Bureau

Palace urged to study cutting P4.35 gasoline excise tax
Writer: Office of Rep. Juan Edgardo Angara
26 April 2011 11:31:37 AM

Malacanang should look into the possible lowering of the P4.35 per liter excise tax on gasoline as a way of cushioning the surge in the price of the fuel used in tricycles, taxis, farm tractors, and fishing bancas.

Rep. Juan Edgardo Angara said if the Palace's "stonewalling on calls to reduce" the 12-percent Value Added Tax on motor vehicle fuel stems from "the fear of disrupting the VAT chain, then it should consider the option of cutting the the excise tax on gasoline."

"If the anxiety over any VAT reduction is due to the administrative problems in implementing two VAT rates in one system , then that fear is absent in the fixed excise tax on gasoline," the Laban lawmaker from Aurora said.

Contrary to the popular perception that VAT is the "biggest tax additive" on fuel, Angara disclosed that gasoline users last year actually paid more excise tax than VAT based on Bureau of Customs records.

Citing 2010 BoC data, Angara said excise tax paid by importers on 1.296 billion liters of premium gasoline amounted to P5.507 billion while VAT payments for the same volume reached only P4.331 billion.

Excise tax paid on 297 million liters of regular gasoline, on the other hand, totaled P1.144 billion, higher than the P931 million in VAT that the said imports fetched.

While oil companies pay up front the excise tax on gasoline imports, the levy is passed on to consumers. "VAT is what we see because it is there in the receipt every time we buy gasoline but it has a bigger but hidden cousin called the excise tax."

Aside from gasoline - which is assessed with an excise tax of P4.35 per liter if unleaded and P5.35 per liter if leaded - aviation gas is also slapped with a P3.67 excise tax per liter .

Kerosene, liquefied petroleum gas, and diesel are, however, excise tax-exempt, "diesel being so on the belief by policymakers that public utility vehicles run on that kind of fuel," Angara explained.

But that exemption, the lawmaker pointed out, was crafted during the time when the market for diesel engines were limited to jeepneys and buses.

"Now, most SUVs and premium cars run on diesel. So what we have here is a situation wherein a diesel engine BMW X5 does not pay excise tax while a tricycle does, wherein a diesel-fed Lexus uses fuel which is excise tax-exempt, while a farmer pays an additional P4.35 per liter on the gasoline for his hand tractor," Angara said.

"The disparity does not end there. A billionaire pays an excise tax of P3.65 for every liter of aviation gas for his private jet, while a marginal fisherman coughs up an excise tax of P4.35 per liter for gasoline for his banca."

Angara stressed the urgent need for fishermen to be given a respite from high fuel prices "because up to 80 percent of the prices of fish in the market represents cost of fuel used in catching them."

In batting for the reduction in the excise tax on gasoline, Angara said such will be easier to implement "because the tax is specific, meaning it is fixed, while VAT, being a percentage tax, is based on value."

"If the reduction in excise tax, is say, P2 per liter, then it is a straight-forward computation, constant, and, therefore, easier to monitor by both the taxpayer and the tax collector.”

"It is not subject to the vagaries of the world market. If and when reduced, government can meet the demands for lower gas prices without destroying an important revenue source that funds social programs," Angara said.

He said it will be up to the government's economic managers "taking into consideration the bigger fiscal picture," to peg the amount to be lopped off from the excise tax.