March 10, 2026
MANILA – The country could see a P136 billion decline in revenues in 2026 if the excise tax on petroleum products is removed, the Department of Finance (DOF) said at a House of Representatives hearing on Monday.
Finance Undersecretary Karlo Fermin Adriano told the House committee on ways and means, which was discussing proposals to temporarily remove or reduce excise taxes on fuel amid the Middle East conflict, that of the P136 billion shortfall, P121.4 billion would come directly from excise tax reductions, and P14.6 billion from lower value-added tax (VAT) collections.
Excise tax is levied on fuel products, capped at P6 per liter of diesel and P10 per liter of unleaded gasoline, liquefied petroleum gas (LPG), and other petroleum products. VAT, meanwhile, is a 12-percent charge imposed on various products.
“Just to provide you some background of the potential impact on the revenue side […] so for instance if we’re going to suspend the excise tax on fuel starting May, the total revenue losses will be around P136 billion, around P121.4 billion from excise tax and around P14.6 million from VAT,” Adriano told the committee.
When committee chairperson and Marikina Rep. Miro Quimbo asked if that would cover a 12-month period, Adriano clarified that the losses would apply only from May to December 2026.
The DOF official also noted that estimated losses could be higher if excise tax suspensions begin in March or April and if crude oil prices rise further, since VAT collections are directly proportional to fuel costs.
“So I would like to note that there will be some additional collection from VAT if prices of Dubai crude oil actually increase, so we calculated that. So, for instance … the assumption actually is around P65 per barrel for the full year. So if we hit at P80, we have an estimated additional collection from VAT of around P16 billion,” Adriano said.
“And if it hits 100 USD per barrel, that’s an additional P37 billion pesos. So the expected revenue losses from excise tax suspension can be partially offset by the additional correction from VAT on oil,” he added.
Adriano also noted that for every peso removed from the P6-per-liter excise tax on diesel, the revenue loss would amount to P9 billion to P10 billion, while every peso removed from the P10-per-liter excise tax on gasoline would translate to P5 billion to P6 billion.
Earlier in the same hearing, the Department of Economy, Planning, and Development warned that if the Middle East conflict drags on and ships carrying oil are blocked from passing through the Strait of Hormuz, diesel prices could rise to P96 per liter.
Planning Undersecretary Rosemarie Edillon said they developed two scenarios to simulate the war’s impact on the local economy.
Scenario 1 predicts the potential economic effect if oil prices rise to US$99.8 per barrel, based on Dubai Crude Oil Futures expectations, but the conflict ends soon. Scenario 2 is more severe, simulating what would happen if “Iran sustains the closure of the Strait of Hormuz,” which could push prices to US$140 per barrel.
Edillon said that under Scenario 2, diesel could reach P96 per liter before any excise tax suspension, potentially dropping to P90.04 per liter if excise taxes are suspended.
“We also simulated the impact of excise tax suspensions, so supposing, so we know that for regular gasoline it is P10 per liter, and then for diesel it’s P6 per liter. In this case, that will actually, let’s say for diesel prices, with excise tax suspensions, if it will be this March, under Scenario 1, from P74.22 per liter it would go down to P67.50 per liter, and then for April, from P67.33 it could go down to P60.61,” Edillon said.
“Under Scenario 2, from P96.76 [per liter] it could go down to P90.04 per liter … and then in April, from P91.19 per liter on average, it could go down to P84.47,” she added.
For gasoline, Edillon said prices may rise to P70.20 per liter, but it may recede to P59 per liter if the excise tax is suspended.
READ: DEPDev warns: Worst-case scenario sees diesel hitting P96 per liter
Edillon also said that the country could see higher headline inflation regardless of the scenario, ranging from 4.5 to 5.1 percent in March 2026 under Scenario 1, and 6.3 to 7.5 percent for the same period under Scenario 2.
This would be a departure from the Bangko Sentral ng Pilipinas projection of 3.4 percent for March 2026.
After the United States (US) and Israel launched attacks on Iran, Tehran responded with drone and missile strikes on the countries’ allies, raising global concern over a wider Middle East conflict.
Several Gulf states condemned Iran’s retaliatory strikes that involved them, heightening fears that the fighting could spread across the region.
The US and Israel defended their operations at the UN, while Iran accused them of committing a “war crime” due to reported civilian casualties, keeping tensions high and diplomacy uncertain.
LIVE: US-Israel strikes on Iran and Middle East crisis updates
Fears have also emerged that oil prices could surge, as the region remains a major hub for crude oil production and trade.
Amena Bakr, head of Middle East and OPEC+ Insights at Kpler, said after the strikes that she expects oil prices “to be between $85 and $90.”
READ: Oil price surge expected due to Middle East conflict
That would mark a significant jump in the price of a barrel of Brent, the international benchmark for crude oil, which had gradually factored in a geopolitical risk premium to trade at over $72 on February 27, compared with $61 at the start of the year.
Currently, proposals seek to suspend the collection of excise taxes on fuel to shield consumers from price shocks.
Committee chairperson and Marikina Rep. Miro Quimbo filed a bill amending Section 148 of the National Internal Revenue Code, granting President Ferdinand Marcos Jr. the authority to suspend the excise tax.
Earlier, Marcos said he would ask Congress to grant him emergency powers to reduce the excise tax on petroleum products as fuel prices are expected to surge due to the Middle East crisis.