As fuel prices continue to weigh on the export sector, the Philippine Exporters Confederation Inc. (Philexport) is calling for the suspension of the 12-percent value-added tax (VAT) to ease cost pressures on businesses and consumers.

In a statement on Thursday, April 16, Philexport president Sergio R. Ortiz-Luis Jr. said that removing VAT would lower costs, support businesses such as micro, small, and medium enterprises (MSMEs), and improve competitiveness in domestic and international markets.

“Fuel is a fundamental input across industries. Reducing the tax burden on fuel will have a cascading positive effect, lowering operational expenses and ultimately stabilizing prices of goods and services,” he said.

Ortiz-Luis cited a recent Philexport survey showing that exporters have reduced production and workdays from six days to around five to three. They have also postponed investments and adjusted pricing.

During Philexport’s second-quarter general membership meeting (GMM) last Tuesday, April 14, Ortiz-Luis said that while exporters are also looking to increase local sourcing and diversify markets, they are currently calling for government support through tax relief, fuel subsidies, export incentives, and other measures that could shield trade from oil price pressures.

“[Exporters] project that they can only sustain current operations for three to six months more and may eventually close if there will be no government support and alternative oil suppliers in Asia,” he stressed.

Furthermore, Ortiz-Luis emphasized that higher transport costs will create a domino effect, as these are passed on to basic goods such as food and medicine, affecting low- and middle-income households.

While VAT has yet to be suspended, Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), noted that the weaker peso provides a slight upside for Filipino exporters, making some products more attractive to foreign consumers.

“[The] offsetting positive factor for exporters is the relatively weaker peso exchange rate versus the United States (US) dollar near the ₱60:$1 levels that could make Philippine exports more price competitive from the point of view of international buyers,” Ricafort told Manila Bulletin.