Exporters are urging the government to consider reducing the 12-percent value-added tax (VAT) on fuel and electricity as escalating tensions in the Middle East push global oil prices higher, raising concerns over increased production costs and potential business closures.
Philippine Exporters Confederation, Inc. (PHILEXPORT) President Sergio Ortiz-Luis Jr. said suspending or removing excise taxes on fuel products could reduce pump prices by roughly P6 to P10 per liter.
He said the government could also consider lowering VAT on fuel and electricity to provide additional relief.
“Lowering the value-added tax on fuel and electricity would help cushion the impact, even if the excise tax is removed. This is meant to prevent fuel prices from rising too much,” Ortiz-Luis said in Filipino during an interview on DZAR 1026 SMNI Radio.
Ortiz-Luis warned that a sharp increase in gasoline prices would likely fuel inflation and raise costs across multiple sectors.
“If gasoline prices increase significantly, it will drive inflation and make things more difficult for everyone. Logistics costs will rise, companies will face higher expenses, and workers will also be affected. Without subsidies, many people will struggle,” he said.
However, Ortiz-Luis noted that exporters previously did not support calls to reduce VAT, even before the latest Middle East tensions, because the benefits would likely favor heavy spenders and large corporations rather than lower-income households.
“Lowering VAT would not necessarily benefit the poor. The savings would mostly go to those who spend more—large companies and wealthier consumers,” he said.
The PHILEXPORT chief also warned that sustained increases in oil prices, driven by geopolitical tensions in the Middle East, could force some businesses to shut down and result in job losses.
He said companies are already grappling with rising operating expenses as fuel prices increase, noting that fuel imports are paid in US dollars.
“Even our advantage of having many overseas Filipino workers sending remittances home could be affected if some of them are impacted by the situation and send less money. At the same time, the peso’s purchasing power continues to decline because we are paying more dollars for fuel imports,” Ortiz-Luis said.
He expressed hope that the conflict in the Middle East would not drag on, stressing the importance of conserving fuel and exploring alternative energy sources.
“If we can find alternative ways to generate power and electricity, then that would be good,” he added.