Learning from crisis

With the latest inflation rate hitting a three-year high of 7.2 percent as of April, Sen. Sherwin Gatchalian called for an immediate suspension of the P6 per liter excise tax on diesel products. With about 80 percent of diesel consumption being the primary fuel of public transport utilities and logistics, Gatchalian believes the temporary suspension of excise tax for now of diesel could immediately temper the rising prices of food, electricity and transport.

As measured by the inflation rate, the average consumer price index had been largely pushed up after the global price of crude oil reached as high as $100 per barrel. This immediately happened after the conflict in the Middle East (ME) broke out on Feb. 28 this year and caused severe disruption in crude oil supply. The US-Israel attacks on Iran led to the closure of the Strait of Hormuz, where most of the world’s crude oil shipments from the ME pass through.

Gatchalian specifically called upon President Ferdinand Marcos Jr. (PBBM) to suspend excise tax on diesel using his powers under Republic Act (RA) 12316 he signed on March 25, 2026. A day earlier, PBBM issued Executive Order (EO) 110 declaring a state of national energy emergency in the Philippines to address energy supply risks stemming from the ME conflict.

At the Kapihan sa Manila Bay weekly news forum last Wednesday, Gatchalian reiterated the President is vested with all the necessary emergency powers, including the authority under our country’s 1987 Constitution, to amend tax and tariff laws while Congress is in recess or sessions are adjourned. Gatchalian though is wary against demands to also remove the 12 percent value added tax (VAT) imposed on fuel consumption.

As provided for in RA 12316, the suspension of excise taxes can be triggered when Dubai crude oil prices exceed $80 per barrel for a month. Thus, Gatchalian cited the President previously heeded calls to suspend excise taxes on two critical refined oil products – liquefied petroleum gas (LPG) and kerosene.

PBBM issued EO 114 that removed the excise taxes on LPG and kerosene but withheld action on gasoline and diesel products. Signed on April 16 this year, EO 114 removed the excise tax equivalent to P3.36 per liter on LPG and P5.60 per liter for kerosene. The President justified selecting only LPG and kerosene, citing these two refined petroleum products as widely used for cooking and basic household needs, particularly by low-income families as most vulnerable sectors of the prevailing oil price crisis.

The proposed suspension or reduction of excise taxes on gasoline and diesel, the President pointed out, is still being discussed by his cluster of Cabinet advisers named as UPLIFT (Unified Package for Livelihoods, Industry, Food and Transport). The UPLIFT was activated by EO 110 to advise the President and draw up the framework of measures to mitigate the impact on essential services and basic products amid the continuing ME conflict.

On the other hand, the Senate leadership organized its own advisory body called the Senate committee on PROTECT, or Proactive Response and Oversight for Timely and Effective Crisis Strategy. The 24-man Senate designated Senator Gatchalian to chair this ad hoc body.

Created under Senate Resolution No. 45, the PROTECT committee was adopted on March 18 to create a national contingency framework on the ME conflict-related crisis. The committee held its first public hearing on March 24 to guide them on how to mitigate the impact of the US-Iran conflict on the Philippine economy. So far, it conducted a total of four public hearings where key Cabinet members and other government officials and private sector representatives were invited.

To date, according to Gatchalian, the Senate PROTECT committee has come up with 49 recommendations, 29 of which were already being implemented by the executive department. The most significant of these was their recommended conduct of “high-level bilateral negotiations” with Iran to include the Philippines in the safe passage through the Strait of Hormuz of oil shipments. Likewise, he welcomed the positive action taken by the executive branch to tap non-traditional sources of crude and refined oil products from Russia.

These recommended measures, he noted, have at the very least secured the country’s oil supply inventory. As the chairman also of the Senate committee on ways and means that handles tax and tariff legislations, Gatchalian shared the concern of the executive department against modifying the existing 12 percent VAT on petroleum products. Tinkering with the VAT law, he warned, is “complicated” and yet the desired result of reducing petroleum prices might result to other more serious problems. He cautioned that the implications of the huge revenue losses from the VAT collections might eventually affect the government’s delivery of basic public services.

He urged his fellow lawmakers to support the passage of his proposed bill seeking to “unbundle” the prices of petroleum products being sold in gasoline stations. Under the existing Downstream Oil Deregulation Law, he noted, consumers have to rely on the oil companies’ decision on how much their weekly adjustments in pump prices will be.

“In times of fast rising prices, the government is blind to how much oil companies earn,” Gatchalian pointed out.

“So we need to empower the government. That power has been removed. So we need to bring back that power of information,” he explained.

Gatchalian disclosed the Senate may also investigate the “creeping” uptick of rice prices. He noted the latest inflation report showed the average increase of prices of rice reached 13.7 percent in April from 3.5 percent in March last year.

Thus, Gatchalian echoed the suspicions of his Senate “seatmate,” Sen. Francis “Kiko” Pangilinan, that this might be a case of manipulation by rice cartels and unscrupulous rice importers taking advantage of the supposed impact of higher fuel costs.

These are the same old problems that crop up whenever there is crisis. But Gatchalian sees a lot of “learnings” that passed the tests of the previous crisis. And some of them could be useful still.