The Department of Economy, Planning, and Development (DepDev) cautioned against proposals to reduce or remove excise taxes and value-added tax (VAT) on fuel.

The warning was raised on Tuesday during a Senate ad hoc hearing on the Middle East crisis, where Senator Loren Legarda sought the position of DepDev Secretary Arsenio Balisacan.

The Secretary noted that while lowering these taxes could temporarily ease inflation by reducing transportation and commodity costs, the resulting loss in government revenue could negatively impact the country’s credit standing and gross domestic product (GDP).

He warned that such measures might ultimately cause the national economy to slow down further.

"It will cause the national economy to slow down even more. That’s the issue. As we look into improving the fiscal resources support system, we can also identify potential sources of revenue so that we can mitigate the negative effects on overall spending,” Balisacan said.

He outlined five possible scenarios, ranging from oil prices reaching $100 per barrel for 60 days to a worst-case scenario of $200 per barrel lasting six months.

Under a worst-case scenario where oil prices reach $200 per barrel for six months, GDP growth in 2026 could slow to between 3.5 and 4 percent.

To mitigate these risks, DepDev proposed the following strategies:

• Short-term: Continue targeted subsidies for farmers and fisherfolk, encourage energy conservation, and crack down on hoarding and anti-competitive practices.

• Medium- to Long-term: Diversify energy sources through nuclear and renewable energy, and strengthen supply chain security.

Secretary Balisacan emphasized the need for a balanced approach that addresses immediate concerns without compromising inclusive, long-term economic growth.

“As we respond to these issues and problems, we are not curtailing our options in the medium and long term. Sana ang response natin is something that will put us at higher and more inclusive growth in the medium to long term,” Balisacan said.

-Paraluman News