Marcos Economic Team Backs Tax Relief on LPG and Kerosene, Rejects Diesel and Gasoline Suspension

Administration Draws the Line on Fuel Excise Taxes

The economic managers of the Marcos Jr. administration have thrown their support behind suspending excise taxes on liquefied petroleum gas (LPG) and kerosene, but firmly rejected calls to do the same for diesel and gasoline, citing the regressive nature of such a move.

The Cabinet-level Development Budget Coordination Committee (DBCC) announced its position on Wednesday, drawing a clear distinction between the two sets of petroleum products as global oil prices continue to pressure Filipino consumers.

The Core Decision

At the heart of the debate is how best to cushion the impact of rising fuel costs without undermining government revenue collection. The DBCC — composed of the administration's key economic managers, including the Department of Finance (DOF) and the National Economic and Development Authority (NEDA) — concluded that:

• LPG and kerosene excise tax relief is warranted because these products are primarily used by lower-income households for cooking and lighting.
• Diesel and gasoline excise tax suspension is not recommended because the benefits would disproportionately flow to higher-income households and vehicle owners.

The DOF has echoed this stance, with Finance Secretary and chief economic manager signaling support for targeted relief rather than broad-based tax suspensions.

Why LPG and Kerosene?

The rationale for prioritizing LPG and kerosene is straightforward from an equity standpoint. LPG remains the primary cooking fuel for millions of Filipino households, while kerosene is widely used for lighting and cooking in off-grid and low-income communities. Suspending excise taxes on these products delivers immediate relief to the households that need it most.

According to government estimates, the excise tax on LPG stands at roughly P3 per kilogram, while kerosene carries a tax of approximately P4 per liter. While these figures may appear modest, they translate into meaningful savings for families already grappling with elevated food and utility costs.

This is not the first time the administration has considered such a measure. A similar suspension was previously implemented for a three-month period beginning in April, effectively reviving a temporary relief mechanism that had been deployed during earlier oil price spikes.

Why Not Diesel and Gasoline?

The rejection of a diesel and gasoline excise tax suspension rests on two pillars: fiscal prudence and distributional fairness.

• Regressive impact: Economists argue that suspending fuel taxes on diesel and gasoline primarily benefits those who consume the most fuel — typically higher-income households, businesses, and owners of multiple vehicles. The poorest Filipinos, many of whom do not own vehicles, would see little direct benefit.
• Revenue loss: Diesel and gasoline account for the bulk of the government's fuel excise tax collection. Suspending these taxes would blow a significant hole in the national budget at a time when the government is already financing ambitious infrastructure and social protection programs.
• Market distortion: Broad-based fuel subsidies can distort consumption patterns and delay the necessary transition toward more efficient and sustainable energy use.

As one lawmaker noted, the DOF's formal recommendation on the suspension of fuel excise taxes is expected to be released soon, but the direction of the economic team's thinking is already clear.

Context: A Familiar Debate

The Philippines has grappled with the question of fuel tax relief repeatedly in recent years. Under the Tax Reform for Acceleration and Inclusion (TRAIN) law, excise taxes on petroleum products were increased in phases, with provisions allowing for suspension when oil prices hit certain thresholds. However, the mechanism has been invoked selectively, reflecting the tension between consumer relief and fiscal sustainability.

The current global oil market remains volatile, driven by geopolitical tensions, supply chain disruptions, and production decisions by major oil-exporting nations. For a net oil importer like the Philippines, every spike in world prices translates directly into higher domestic pump prices and transport costs.

Analysis: A Calculated Political and Economic Balance

The DBCC's decision reflects a carefully calibrated approach that seeks to balance competing pressures.

Politically, the administration can point to tangible relief for low-income households through LPG and kerosene tax relief — a move that is easy to communicate and defend. Simultaneously, by rejecting diesel and gasoline suspensions, it avoids accusations of fiscal irresponsibility and maintains a revenue base that funds public services.

Economically, the targeted approach is more efficient. Subsidizing LPG and kerosene costs the government far less than a blanket suspension on all petroleum products, while still addressing the needs of vulnerable sectors. It also aligns with the principle that social protection should be means-tested and targeted rather than universal.

However, there are risks. Transport groups and commuters — who bear the brunt of higher diesel and gasoline prices through increased fare and transport costs — may view the decision as insensitive to their plight. The government will need to communicate clearly that other measures, such as targeted subsidies for public utility vehicle drivers and fare discounts, are being pursued to address their concerns.

What's Next?

The DOF is expected to release its formal recommendation on the excise tax suspension in the coming days. The proposed relief for LPG and kerosene will likely require congressional action or an executive order, depending on the legal mechanism chosen.

For now, the Marcos administration has drawn a clear line: help for the kitchen table, but not for the gas tank. Whether that distinction holds up under continued oil price pressure — and public scrutiny — remains to be seen. What is certain is that the debate over fuel taxes will remain a flashpoint in Philippine politics, pitting immediate consumer relief against long-term fiscal health.