We cannot think of wars, especially the currently ongoing conflict in Iran and the Middle East, as far removed from our daily lives. It’s true before, and it’s even more true now – this war that the US and Israel started against Iran is sending shockwaves all around the world.

The thing is that this is not a war we chose, but we are already starting to feel its effects.

It’s such a difficult time to be living right now. Daily war updates fills our social media  and broadcast news feeds.  The price of diesel and gasoline is slowly starting to go up. Jeepney drivers are earning only ₱56 after spending ₱1,200 pesos on diesel for the day. But President BBM suspended the fare hike, because “maybe this is not the time to raise fares for our countrymen”. 

As tensions in the Middle East push global prices upward, we feel the impact almost immediately due to our heavy reliance on imported fuel from the Middle East. And of the many strategies that the government is implementing now, I think the one on suspending fuel excise tax requires the most careful analysis.

Not as Straightforward as it Seems

The logic is straightforward: remove a fixed tax per liter, and pump prices go down immediately. 

Lawmakers have already adopted the measure to allow the president to suspend and reduce the excise tax on petroleum products – all that is needed to pull the trigger is for BBM to sign it into law.

In theory, this seems like a clear win. Lower fuel prices provide immediate relief, particularly to PUV drivers who are experiencing the brunt of the oil price increases, thus directly impacting the money they take home daily. Furthermore, reduced fuel costs help mitigate transport costs for logistics and food sectors, which should, in turn, help control overall price hikes.

Everything Comes with a Cost

However, this comes at a cost. If the excise tax is suspended, the government loses around ₱43.3 billion per three months, and up to ₱106 billion if extended until September. This is money that is supposedly for funding the government’s activities, like its subsidies and social programs.

Trust in the government to deliver has taken a hit recently, as the flood control scandals from last year have yet to be resolved. 

What is interesting to note is this – based on reports, the Philippines has lost an estimated ₱42.3 – 118.5 billion per year from flood control corruption – around the exact amount that the government stands to lose from suspending excise tax on petroleum. Instead of a year, though, the same amount will be lost in just around 6 months.

So what do I think – is suspending the excise tax a good idea? 

Excise Tax Suspension Gives Relief – but for Whom?

The benefits from the tax suspension are also uneven:1

  • Higher-income households who consume more fuel via private vehicles stand to gain the most direct savings.1
  • Lower-income Filipinos who depend on public transport receive only indirect benefits, such as reduced pressure on PUV fare hikes and cost control for businesses in food and logistics.

The excise tax cut provides relief to those in need but extends the same financial benefit to owners of luxury SUVs.

Subsidies Might Work Better, if Implemented Well

Targeted measures, such as fuel subsidies or direct cash aid, would provide more direct and precise help to the most affected Filipinos. The suspension of the excise tax, however, diminishes the funds available for these targeted subsidy programs. Ultimately, the efficacy of any measure remains a matter of proper implementation.1

Suspending the excise tax is a blunt, fast tool that may help, but it is definitively not a silver bullet solution. The crisis’s root cause lies beyond the Philippines’ control, and suspending the tax should not be the only measure explored.