VAT vs excise: Which fuel tax cut gives more price relief? MANILA, Philippines — As global oil prices surge, policymakers in the Philippines are weighing whether suspending the 12% value-added tax (VAT) on fuel may provide greater relief at the pump than cutting excise taxes. Using a sample diesel price of P100 per liter, the reductions are as follows:Scenario Computation Resulting Price Current price (with excise + VAT) Base + P6 excise + 12% VAT P100.00 Remove excise only Subtract P6, VAT still applied ~P93.75 Remove VAT only Subtract 12% VAT on total price ~P89.29In this simplified example, removing VAT results in a larger price reduction than removing the excise tax, because VAT applies to the entire price, including the excise. Estimates presented to Congress show that a three-month suspension of fuel excise taxes could cost the government about P43.3 billion, rising to around P106 billion if extended through September. The choice between VAT and excise tax relief ultimately reflects a trade-off between immediate price reduction and long-term revenue stability.

Source: Philippine Star March 31, 2026 04:20 UTC