The fuel tax that punishes the poor for being poor

There is a number worth sitting with for a moment. Among the country’s 14 million wage-earning households, the poorest 10% — roughly 1.05 million families — spend nearly 21% of their income on gasoline. The wealthiest 10%? About 6%. Same tax, same pump price, completely different weight.

This is how regressive taxation works: it extracts proportionally more from people who have less. And yet here we are, still debating whether to suspend the excise tax — PHP 10 per liter on gasoline, PHP 6 on diesel under the TRAIN Law — as if the math hasn’t always been obvious.

A recent policy note from the UP School of Economics, drawing on the 2023 Family Income and Expenditure Survey, found that a blanket suspension of fuel excise taxes would see the richest 30% of households capture nearly half of the forgone revenue, while the bottom 30% would get only about 17% for gasoline — and a staggering 2.5% for diesel.

JC Punongbayan, the UPSE economist behind the note, has a point: a blanket suspension isn’t clean redistribution. But this critique of the mechanism shouldn’t be used to bury the underlying argument about the burden. The poor are still carrying it disproportionately. The question is how to fix that without using it as an excuse to do nothing.

The downstream effect is where the real cost hides. Fuel drives food prices, transport fares, electricity rates. The poorest households may not fill a private car every week, but they ride jeepneys, buy rice hauled by trucks, and cook with LPG delivered by fuel-burning vans. Every pump price hike multiplies invisibly through every peso they spend. The government knows this. It has always known this.

And then there are the people for whom this is not abstract at all. Drivers’ group Piston has documented jeepney drivers and operators taking home only PHP 200 to PHP 300 from a full day of plying their routes, spending more than PHP 3,000 daily on diesel for a traditional jeepney that consumes about 30 liters. At the height of the last fuel crisis, one driver — Benny Medina — netted PHP 56 after spending PHP 1,200 on diesel for an entire day. Fifty-six pesos. Less than the price of a kilo of rice.

The same pressure, less visible but just as real, is hitting the country’s 1.2 million micro and small enterprises. A sari-sari store that relies on a delivery tricycle, a small bakery running a diesel generator during brownouts, a carenderia sourcing ingredients from the wet market via habal-habal — none of them have a treasury department to model fuel cost exposures. They just absorb it, or they close. The Philippine Chamber of Commerce and Industry has warned that prolonged fuel price instability could weigh heavily on smaller firms, which form the backbone of the economy, with PCCI President Ferdinand “Perry” Ferrer putting it plainly: “The longer it takes, the lesser the chances for our MSMEs to bounce back.” MSMEs contribute roughly 40% of GDP and employ the majority of the private sector workforce. They also have no mechanism to pass fuel costs upstream the way large corporations can. The excise tax doesn’t show up as a line item on their receipts — it just quietly eats into margins that were never thick to begin with.

The government’s answer to this, then and now, is cash assistance. The latest round: PHP 5,000 fuel subsidies distributed to about 23,000 Metro Manila jeepney drivers, led by the DSWD. It’s not nothing. But divide PHP 5,000 by a daily fuel spend of PHP 1,000 to PHP 3,000 and you get less than a week of relief, delivered weeks late, through a bureaucracy that has never been particularly clean about who ends up on the list. Ghost beneficiaries, delayed payouts, political sorting — these aren’t new complaints. They’re the reliable texture of every ayuda rollout this country has ever run.

The DOF has estimated that a full excise suspension could cost the government roughly PHP 136 billion in 2026. That is a real fiscal concern. The government is already running a projected PHP 1.65-trillion deficit. Suspending excise taxes without plugging that gap somewhere else would mean borrowing to fund relief — not ideal. But the alternative being offered, of collecting the tax and redistributing it as subsidies, rests on a version of the Philippine government that doesn’t exist in practice: efficient, incorruptible, and fast. Every peso collected passes through a system with documented losses before any of it becomes ayuda.

On March 25, President Marcos signed Republic Act 12316 into law, giving himself the authority to suspend or reduce excise taxes on petroleum products whenever Dubai crude breaches USD 80 per barrel — which it already has. This is at least a step. But the law is still structured around emergency powers and executive discretion, not a structural rethinking of who should bear the country’s tax burden in the first place.

That rethinking is what the country keeps postponing. Consumption taxes — excise included — are cheap to administer and politically convenient. They do not require confronting wealth concentration, capital gains, or the corporate sector. They fall quietly on everyone at the pump, the sari-sari store, the tricycle terminal. The poor pay in smaller absolute amounts but in far larger proportions of what they have. That’s the architecture TRAIN locked in, and no amount of ayuda undoes it.

Suspending the fuel excise tax, with a well-designed compensatory mechanism for revenue replacement, is not the whole answer. But it’s an honest starting point — one that acknowledges the burden exists, that the current system places it on the wrong people, and that targeted subsidies are not a substitute for getting the tax structure right. The Philippines has been choosing the subsidy path for years. The result is drivers earning PHP 56 for a full day’s work and a government still insisting it’s doing enough.