The country’s top oil refiner Petron Corp. has lauded the recent decision of the Supreme Court that local government units (LGUs) are not authorized to impose business taxes on companies engaged in the sale of petroleum products.
In a 26-page decision, the Supreme Court also made permanent the temporary restraining order it issued on Aug. 4, 2003 enjoining the municipal government of Navotas from closing Petron’s depot or interfering in its operations for failure to pay its alleged tax deficiency.
“We welcome the Supreme Court ruling since it lays to rest an issue that not only affects our operations in Navotas but in other parts of the country as well,” Petron vice-president for legal and external affairs Jose Jesus Laurel said.
In early 2002, Petron was assessed business taxes amounting to P10.2 million for its diesel sales at its Navotas depot from 1997 to 2001.
It is the leading oil refining and marketing company in the Philippines . Its 180,000 barrel-per-day oil refinery a provision in produces a full range of petroleum products to supply nearly 40 percent of the country’s fuel requirements.
Petron protested the assessment based on Section 133 of the Local Government Code which states that LGUs “shall not extend to the levy of taxes, fees or charges on petroleum products.”
The company’s protest was also supported by a ruling from the Department of Finance stating that sales of petroleum products are not subject to local taxation.
The protest was denied and thereafter a demand to pay was issued by the municipal government of Navotas with a threat of closure. The municipality also refused to issue a business permit.
Petron then filed a complaint for cancellation with the Malabon Regional Trial Court (RTC), which was dismissed.
In the Supreme Court ruling, it was further noted that oil is a political commodity and “it can be reasonably presumed that if municipalities, cities and province were authorized to impose business taxes on manufacturers and retailers of petroleum products, the resulting losses to these enterprises would be passed on to the consumers, triggering the chain of increases that normally accompany the increase in oil prices.”
Petron’s Navotas depot is essential to the municipality’s fishing industry and serves the fuel requirements of manufacturing and power-generation sectors.