Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

HOUSE BILL No._2719

Introduced by Reps. TEDDY A. CASINO, NERI JAVIER COLMENARES,
RAFAEL V. MARIANO, RAYMOND V. PALATINO, and ANTONIO L. TINIO

EXPLANATORY NOTE

‘The imposition of the regressive value-added tax (VAT) on goods and services has greatly affected the
purchasing capacity of Filipino citizens from all walks of life — especially on the majority of those who
receive salaties below the required cost of living and those who are underemployed or have no jobs at
all.

Petroleum products, particularly fuel and cooking oils, are important commodities that affect all aspects
of living in our country. Aside from having a ditect impact on transportation, itis a key input to
production, thereby affecting all goods and services.

Any change in prices of oil (including unleaded gasoline, diesel oil, liquefied petroleum gas (LPG), for
kerosene, fuel oil) directly affects the prices of food, energy and other goods. It is a key determinant to
the quality of life of our people, and its affordability as a basic commodity rests primarily on
government.

From 2009 to August 2010, gasoline prices increased 41 times (cumulative P36.75 in adjustments) and
decreased 25 times (cumulative P18.25 in adjustments) while diesel prices increased 34 times (P31) and
decreased 34 times (P23.50).

In Metro Manila as of mid-2010, gasoline prices now range from P42.20 to P46.02 per liter; diesel prices
fom P33.50 to P34.79 per liter; and from P576.50 to P651.50 for an 11-kg tank of LPG. These pump
price incteases are in light of the increase of international crude oil and finished petroleum prices. As of
November 2007, the price of Dubai ceude oil has increased, year on year, by 51.5% to $85.92 per barrel,
from $56.72/barrel. In the same light, international prices of finished petroleum products have increased
by as much as 50% from December 2006 to November 2007. Current figures of Dubai crude (as of July
2010) are at $72 per barrel. The price of unleaded gasoline on the other hand, based on the Mean of
Platts Singapore (MOPS) benchmark was at of $82 a barrel while diesel prices were at $85 a barrel. But
these figures do not guarantee lower pump prices as oil price hikes are at the whim of the foreign oil
corporation principals.

Up to 95% of the country’s petroleum requirements are imported, rendering us exceedingly vulnerable
to the dictates of big transnational oil corporations. The worst implication of this system is that our
severe dependence on such corporations, which control not only the importation, refining, and setailing
of erude and petroleum products from abroad, but also control the exploration, exploitation, refining,


retailing, and even te-exportation of our country’s indigenous petroleum and petroleum-based products,
deprives us the opportunity to be self-sufficient.

‘The Big Thrce, or the local subsidiaries of Shell, Chevron (formerly Caltex), and Petron, claim that they
do not overprice, that they set prices based on the price increases of Dubai oil exchanged over the spot
market and on Peso-Dollar exchange rate fluctuations. Moreover, they deny the existence of a cartel,
alleging that they merely follow the movements of world oil prices. They claim these even as they are
minimally affected by prices in world markets and even as they are able to trade in the same currency
between subsidiaries.

‘The Reformed Value-Added Tax (RVAT) under Republic Act No. 9337 does not consider the present
world 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 sale and importation of crude oil
and finished petroleum products. Because of the erroneous assumptions used in this law, Congress has
even heightened the sufferings of the Filipino people.

Furthermore, we see that this windfall from VAT on oil has been used to cover-up the continued
inefficiencies and irregularities in tax collections that would have also resulted in a more sustainable
windfall for the government if addressed sincerely. It is a primary task of the government to ensure the
improvement of the quality of living of the people, including protecting its citizens from rapacious
business practices of foreign companies and its local subsidiaries. Thus, this proposal that the sale or
importation of petroleum products and raw materials used in the manufacture of the same be exempted
from the regressive VAT.

In view of the foregoing, the immediate approval of this measure — along with the passage of other
conctete actions by the legislature to address the problematic situation of the oil industry — is earnestly
sought.

Approved,

TEDDY A. CASINO
an Muna Party-list

‘AEL V. MARIANO
‘Anakpawis Party-list

‘ONIGL. TINIO
ACT Teachers Party-list



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

HOUSE BILLNo.__2719

Introduced by Reps. TEDDY A. CASINO, NERI JAVIER COLMENARES,
RAFAEL V. MARIANO, RAYMOND V. PALATINO and ANTONIO L. TINIO

AN ACT
CLASSIFYING THE SALE OR IMPORTATION OF PETROLEUM PRODUCTS
AND RAW MATERIALS IN THE MANUFACTURE THEREOF AS VALUE-ADDED TAX
EXEMPT TRANSACTIONS, AMENDING FOR THE PURPOSE SECTION 109 (1) OF
REPUBLIC ACT NO, 8424, OTHERWISE KNOWN AS THE TAX REFORM ACT OF 1997,
AS AMENDED BY REPUBLIC ACT NO. 9337, AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

SECTION 1. Section 109 (1), Chapter 1, Title IV, Value-Added Tax of. Republic Act No. 8424,
otherwise known as the Tax Reform Act of 1997, as amended by Republic Act No. 9337, is hereby
further amended to read as follows:

“SEC. 109. Exempt Transactions. ~ (1) Subject to the provisions of subsection (2) hereof, the following
transactions shall be exempt from the value-added tax:

(A) xxx
“@) xxx

After paragraph (B), insert the following paragraphs (C) and (D).

“(C) SALE OR IMPORTATION OF PETROLEUM PRODUCTS (EXCEPT
LUBRICATING OIL, PROCESSED GAS, GREASE, WAX, PETROLATUM, AND COAL
AND NATURAL GAS IN WHATEVER FORM OR STATE) SUBJECT TO EXCISE TAX
IMPOSED UNDER TITLE VI;

“(D) SALE OR IMPORTATION OF RAW MATERIALS TO BE USED BY THE
BUYER OR IMPORTER HIMSELF IN THE MANUFACTURE OF PETROLEUM
PRODUCTS SUBJECT TO EXCISE TAX, EXCEPT LUBRICATING OIL,
PROCESSED GAS, GREASE, WAX AND PETROLATUM; es

And re-letter the succeeding paragraphs as from (E) to (X).
SECTION 2. implementing Rules and Regulations. ~The Secretary of Finance shall, upon the

recommendation of the Commissioner of Internal Revenue, promulgate not later than 15 days upon the
effectivity of this Act, the necessary Rules and Regulations for the effective implementation of this Act.


SECTION 3. Repealing Clause.— All laws, acts, decrees, executive orders, issuances, and rules and
regulations or parts thereof which are contrary to and inconsistent with any provisions of this Act are
hereby repealed, amended or modified accordingly.

SECTION 4. Separability Clause. ~ If any provision of this Act is subsequently declared
unconstitutional, the validity of the remaining provisions hereof shall remain in full force and effect.

SECTION 5. Effectivity Clause. - ‘This Act shall take effect immediately after its complete publication
either in the Official Gazette or in a newspaper of general circulation in the Philippines.

Approved,