FOURTEENTH CONGRESS OF THE 
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REPUBLIC OF THE PHILIPPINES 
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First Regular Session 
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INTRODUCED BY THE HONORABLE MAR ROXAS 
EXPLANATORY NOTE 
Oil is an important commodity that permeates all aspects of living in our country. Aside from 
directly affecting transportation, it is a key input to production, thereby affecting all goods 
and services that are ultimately delivered to the consumer. Any change in the supply or price 
of oil significantly affects the prices of food, energy and other goods. It is a'&y determinant 
to the quality of life of the people, which is the primary task of the government. 
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As of the filing of this bill, the prevailing pump price of unleaded gasoline has increaseksince 
the start of the year by 19.3% or P7.20 per Liter, from P37.25 to P44.4/L; for diesel oil, 15.'6% 
or P5.20/L, from P33.25 to P38.45/L; for liquefied petroleum gas (LPG), 27.3% or P6.57/L, 
from P24.07 to P30.64/L; for kerosene, 14.9% or P5.20/L, from P34.79 to P39.99/L; and for 
fuel oil, 38.3% or P8.21/L, from P21.45 to P29.66/L. 
For this year alone, as of the filing of this bill, there have been a total of 18 price increases 
versus 6 rollbacks for liquefied petroleum gas (LPG); 17 hikes for unleaded gasoline and fuel 
oil, versus 5 and 4 rollbacks, respectively; and 14 hikes for kerosene and diesel oil versus 6 
and 5 rollbacks, respectively. 
These pump price increases are in light of the increase of international crude oil and finished 
petroleum prices. As of November this year, the price of Dubai crude has increased, year on 
year, by 51.5% to $85.92 per barrel, from $56.72/barrel. In the same light, international 
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prices of finished petroleum products have increased by as much as 50% from December last 
year to November this year. 
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We do not see world oil prices decreasing in the medium-term due to the ongoing global 
political and economic scenario that are beyond our government's control. New economic 
superpowers are emerging by the name of China and India, and their exponentially 
increasing production, by themselves alone, is enough to skew the supply and price of oil 
against developing countries like the Philippines. Geopolitical events involving key oil 
producing areas such as the Middle East, particularly Iran, and Russia also affect the 
availability of crude oil and finished petroleum products in the world market. 
Though it is the primary task of the government to ensure the quality of living of the people, 
we lament to see that it has resigned itself to simply accepting that oil prices will continue to 
increase, whether we like it or not. With this, powers given to it under several!'laws, 
including the visitorial powers under the Downstream Oil Deregulation Act, have not been 
utilized to the fullest in past years. Furthermore, several laws affecting the pump prices of 
petroleum products that are not attuned to the times exist, and we have not seen to efforts to 
realign these to the present scenario. 
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One of such laws is the Expanded Value-Added Tax Law, or Republic Act No. 9337. The latv 
took effect in November of 2005 on assumptions that do not factor-in the present Gorld 
economy and geopolitical scenario. The government has unjustly earned a net windfall of 
P38.9B in 2006 from the imposition of a 12% value-added tax (VAT) on the importation Znd 
sale of crude oil and finished petroleum products. 
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Because of the erroneous assumptions used in this law, Congress has even further tightened 
the belt of Juan Dela Cruz. 
Furthermore, we see that this windfall from VAT on energy has been used to smokescreen 
the continued inefficiencies and irregularities in tax and customs administration that would 
have also resulted in a more sustainable windfall for the government if addressed sincerely. 
What is this additional P38.9B to the government’s coffers for, if the people do not feel the 
full effect of these additional revenues to their lives? What is this additional revenue for, if it 
translates to constricted purchasing power of the public, and eventually, further st$s 
the 
growth of a consumption-driven economy? 
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We are proposing that crude oil and finished fuel products be treated as zero-rated goods for 
six months, practically suspending the imposition of 12% VAT on the importation or sale of 
the said goods. 
After the said period of suspension or temporary imposition of a zero-rate VAT, the 
President, upon consultation with the Secretaries of Finance and of Energy, shall make a 
determination as to whether the 12% VAT on these crude oil and finished petroleum 
products shall be re-imposed in full or on a staggered basis. 
In view of the foregoing, the immediate approval of this bill-along 
with. the 
implementation of other sincere and concrete actions by the government to addre$ this 
urgent situation-is 
earnestly sought. 


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FOURTEENTH CONGRESS OF THE 
1 
REPUBLIC OF THE PHILIPPINES 
1 
First Regular Session 
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INTRODUCED BY THE HONORABLE MAR R O U S  
AN ACT 
CLASSIFYING TRANSACTIONS INVOLVING PETROLEUM PRODUCTS AS ZERO- 
PERCENT (0%) VALUE-ADDED TAX (VAT) TRANSACTIONS, AMENDING FOR THE 
PURPOSE SECTION 108 (B) OF REPUBLIC ACT NO. 8424, AS AMENDED BY REPUBLIC 
ACT NO. 9337, OTHERWISE KNOWN AS THE TAX REFORM ACT OF 1997, AND FOR 
OTHER PURPOSES. 
Be it enacted by the Senate and House of Representatives of the Philippines in Congress 
assem bled: 
,( 
SECTION 1. Section 108 (B) of Republic Act No. 8424, as amended by Republic Act 
No. 9337, otherwise known as the Tax Reform Act of 1997, is hereby amended to read as 
follows: 
(B) Transactions Subject to Zero Percent (0%) Rate. - 
The following services 
performed in the Philippines by VAT-registered persons shall be subject to 
zero percent (0%) rate: 
(1) xxx 
(2) xxx 
(3) xxx 
(4) xxx 
(5) 
xxx 
(6) XXX 
(7) 
xxx 
(8) SALE OR IMPORATION OF PETROLEUM PRODUCTS 
AND RAW MATERIALS TO BE USED BY THE BUYER OR 
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IMPORTER 
HIMSELF 
IN 
THE 
MANUFACTURE 
OF 
PETROLEUM PRODUCTS SUBJECT TO EXCISE TAX, 
EXCEPT LUBRICATING OIL, PROCESSED GAS, GREASE, 
WAX, PETROLATUM, COAL AND NATURAL GAS FOR A 
PERIOD 
OF ONLY SIX (6) MONTHS 
FROM 
THE 
EFFECTIVITY OF THIS ACT; PROVIDED, THAT AFTER A 
PERIOD OF SIX (6) MONTHS FROM THE EFFECTIVITY OF 
THIS ACT, THE PRESIDENT, UPON CONSULTATION WITH 
THE DEPARTMENT OF FINANCE AND THE DEPARTMENT 
OF 
ENERGY, 
SHALL 
DETERMINE 
WHETHER 
TO 
PROSPECTIVELY RESTORE THE FULL TWELVE PERCENT 
(12%) VAT IMMEDIATELY OR ON A STAGERRED BASIS. IN 
EITHER CASE, THE APPROPRIATE PRESIDENTIAL ORDER, 
AS WELL AS THE NECESSARY IMPLEMENTING RULES 
AND REGULATIONS, SHALL THEN BE ISSUED FOR THE 
PURPOSE. 
SECTION 2. Separability Clause. - Any portion or provision of this Act that may be 
declared unconstitutional or invalid shall not have the effect of nullifying oher portions and 
provisions hereof as long as such remaining portion or provision can still subsist and be given 
effect in their entirety. 
SECTION 3. Repealing Clause. - All laws, decrees, executive orders, proclamations and 
administrative regulations, or parts thereof inconsistent herewith are hereby repealed or 
modified accordingly. 
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SECTION 4. Effectivity Clause. - This Act shall take effect immediately after its 
publication in at least two national papers of general circulation. 
Approved, 
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