THIRTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
) 
INTRODUCED BY SENATOR MAR ROXAS 
EXPLANATORY NOTE 
This bilI seeks to amend Republic Act No. 9337, which amended the National Internal 
Revenue Code of 1997, by deferring the imposition of value-added tax (VAT) on petroleum products 
until June 1,2006, and retaining the previous levels of excise tax applicable to them during the period 
of deferment. 
Republic Act No. 9337, otherwise known as the Value Added Tax Reform Law, was enacted 
for the purpose of generating revenue for the government in the estimated amount of @82 billion 
annually at 12% VAT (70% collection efficiency). One of the biggest items in this revenue measure is 
the lifting of VAT exemption of petroleum products, which is expected to raise the national income 
by @29 billion starting 2006. 
Recently, global oil prices have risen to new record highs of US$70 per barrel from only 
US$11 in 1998, and are expected to remain at such level in the next 12 months. During the 
deliberations on the imposition of VAT on petroleum products, the prevailing price of oil in the 
world qarket was only between US$40 to US$45 per barrel. At'US$30 price difference, this means an 
additional US$3.8 billion dollar reserves spending in order to satisfy the country's oil importation of. 
at least 126 million barrels per year, which amount is already 4.5% of our GDP of US$85 billion. 
(. 
At the time when the Congress was still discussing the new VAT law, the estimated 
increase in pump prices at 10% VAT was g0.63 per liter for diesel, P1.22 per liter for fuel oil, and 
e1.66 for LPG. The increase in,the world prices by more than 50% changes entirely the milieu and 
context by which VAT on oil was passed. 
The disturbingly high cost of oil prices in the world market dictates an inevitable increase in 
dollar spending for our oil ,imports. This has the effect of draining our foreign exchange reserves, 
thus further weakening the value of peso and increasing interest rates. VAT on oil will inevitably 
increase the cost of doing businesses which basically depend on,oil as primary input, prompting some 
businessmen to even cease their'operations. Prices of goods and services will surge upwards to levels 
which consumers may not afford. With the slowdown of economic activity and consumer demand, 
which is even more aggravated by declining value of peso, the government may end up collecting less 
than what it expects to gain from VAT imposition on oil, all at the risk of economic degeneration and 
revenue collapse. 
The playing field' has drastically changed since the passage of RA 9337. As shown, the 
economic benefit sought to be obtained by the immediate imposition of VAT on oil will not be 
sustained, and the injury it would cause to our economy will be definitely greater. 


THIRTEENTH CONGRESS OF 
) 
THE REPUBLIC OF THE PHILIPPINES 
) 
yj SEp -7 P 2 ::i7 
Second Regular Session 
1 
/ 
INTRODUCED BY SENATOR MAR R O U S  
AN ACT 
AMENDING SECTIONS 4 AND 5 OF REPUBLIC ACT NO. 9337, ENTITLED 
“AN ACT AMENDING SECTIONS 27, 28, 34, 106, 107, 108, 109, 110, 111, 112, 
113, 116, 117, 119, 121, 148, 151, 236, 237 AND 288 OF THE NATIONAL 
INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER 
PURPOSES.” 
Be it enacted by the Senate and House of Representatives of the Philippines in Congress 
assembled: 
SECTION 1. 
amended by Section 4 of R.A. No. 9337, is hereby amended to read as follows: 
“SEC. 106. Value-added Tax on Sale of Goods or Properties. - 
“(A) 
Section 106(A) of the National Internal Revenue Code of 1997, as 
Rate and Base of Tax. - There shall be levied, assessed and 
collected on every sale, barter or exchange of goods or properties, a value- 
added tax equivalent to ten percent (10%) of the gross selling price or 
gross value in money of the goods or properties sold, bartered or 
exchanged, such tix to be paid by the seller or transferor; Provided, That 
the President, upon the recommendation of the Secretary of Finance, shall, 
effective January 1, 2006, raise the rate of value-added tax to twelve 
percent (12%), after any of the following conditions has been satisfied: 
“(i) 
Value-added tax collection as a percentage of Gross 
Domestic Product (GDP) of the previous year exceeds two and four-fifth 
percent (2 4/5%); or 
“(ii) 
National government deficit as a percentage of GDP of the 
previous year exceeds one and one-half percent (1 % %). 
PROKlDED, FURTHER, THAT THE VALUE-ADDED TAX 
SHALL BE IMPOSED ON PETROLEUM PRODUCTS (EXCEPT 
LUBRICATlNG OIL, PROCESSED GAS, GREASE WAX AND 
PETROLATUM) BEGINNING JUNE 1, 2006. 
DURING THE 
PERIOD OF EXEMPTION, THE RATE OF EXCISE TAX ON 
PETROLEUM 
PRODUCTS 
EXISTING 
PRIOR 
TO 
THE 
EFFECTIVITY OF REPUBLIC ACT NO. 9337 SHALL REMAIN IN 
FORCE. 
“(1) 
The term ‘goods or properties’ shall mean all tangible and 
intangible objects which hare capable of pecuniaq estimation and shall 
include: 


x x x  
x x x  
x x x. 
SECTION 2. Section 107 of the National Internal Revenue Code of 1997, as amended 
by Section 5 of R.A. No. 9337, is hereby amended to read as follows: 
“SEC. 107. Value-added Tax on Importation of Goods. - 
“(A) 
In General. - There shall be levied, assessed and collected 
on every importation of goods a value-added tax equivalent to ten percent 
(10%) based on the total value used by the Bureau of Customs in 
determining tariff and customs duties, plus customs duties, excise taxes, if 
any, and other charges, such tax to be paid bythe importer prior to the 
release of such goods from customs custody: Provided, That where the 
customs duties are determined on the basis of the quantity or volume of 
the goods, the value-added tax shall be based on the landed cost plus 
excise taxes, if any: Provided, further, That the President, upon the 
recommendation of the Secretary of Finance, shall, effective January 1, 
2006, raise the rate of value-added tax to twelve percent (12%), after any 
of the following conditions has been satisfied: 
“(i) 
Value-added tax collection as a percentage of Gross 
Domestic Product (GDP) of the previous year exceeds two and four-fifth 
percent (2 4/5%); or 
“(ii) 
National government deficit as a percentage of GDP of the 
previous year exceeds one and one-half percent (1 % YO). 
PRO WDED, FURTHER, THAT THE VALUE-ADDED TAX 
SHALL BE IMPOSED ON PETROLEUM PRODUCTS (EXCEPT 
LUBRICATING OIL, PROCESSED GAS, GREASE WAX AND 
PETROLATUM) BEGINNING JUNE 1, 2006. 
DURING THE 
PERIOD OF EXEMPTION, THE RATE OF EXCISE TAX ON 
PETROLEUM 
PRODUCTS 
EXISTING 
PRIOR 
TO 
THE 
EFFECTIVITY OF REPUBLIC ACT NO. 9337 SHALL REMAIN IN 
FORCE. 
“(B) 
Transfer of Goods by Tax-exempt Persons. - x x x 
x x x  
x x x  
x x x  
SECTION 3. Repealing Clause. - All laws, decrees and orders or parts thereof 
inconsistent herewith, are deemed repealed or modified accordingly. 
SECTION 4. Separability Clause. - The provisions of this Act are hereby declared to be 
separable and, in the event any of such provisions is declared unconstitutional, the other 
provisions which are not affected thereby shall remain in full force and effect. 
SECTION 5. Effectivity. - This Act shall take effect fifteen (15) days following its 
publication in a newspaper of general circulation in the Philippines. 
Approved. 
2