F[FTEENTH CONGRESS OF THE REPUBLIC) 
OF THE PH[LlPPINES 
) 
First Regular Session 
) 
SENATE 
Senate Bill No. 742 
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INTRODUCED BY SEN. JINGGOY EJERCITO ESTRADA 
EXPLANATORY NOTE 
Oil is one of the important ·commodities that affects 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. [t is a key determinant to the quality of 
life of the people, which is the primary task of the government. 
We do not see world oil prices decreasing in the medium-term due to the 
ongoing global political and econo,mic scenario that are beyond our government's 
control. 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 efforts to realign 
these to the present scenario. 
One of such laws is the Expanded Value-Added Tax Law, or Republic Act 
No. 9337. The law took effect in ,November of 2005 on assumptions that do not 
factor-in 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 importation and sale of crude oil and finished 
petroleum products. 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. 
The proposed measure shall make crude oil and finished fuel products to 
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. 
In view of the foregoing, the immediate approval of this bill is earnestly 
sought. 
Senator 


FIFTEENTH CONGRESS OF THE REPUBLIC) 
OF THE PHILIPPINES 
) 
First Regular Session 
) 
10 
JUL -7 P4 >14 
SENATE 
Senate Bill No. '( 42 
INTRODUCED BY SEN. JINGGOY EJERCITO ESTRADA 
AN ACT 
CLASSIFYING TRANSACTIONS INVOLVING PETROLEUM PRODUCTS AS 
ZERO 
PERCENT 
(0%) VALUE-ADDED TAX (VAT) TRANSACTIONS, 
AMENDING FOR THE PURPOSE SECTION 108 (8) 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 assembled: 
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 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. 


SEC. 2. Separability Clause. - Any portion or provision of this Act that 
may be declared unconstitutional or invalid shall not have the effect of nullifying 
other portions and provisions hereof as long as such remaining portion or 
provision can still subsist and be given effect in their entirety. 
SEC. 3. Repealing Clause. - All laws, decrees, executive orders, 
proclamations and administrative regulations, or parts thereof inconsistent 
herewith are hereby repealed or modified accordingly. 
SEC. 4. Effectivity Clause. - This Act shall take effect immediately after 
its publication in at least two national papers of general circulation. 
Approved,