Ex-BIR chief defends decision to waive excise tax on Shell

MANILA, Philippines - Former Internal Revenue Commissioner Jose Mario Buñag defended his decision waiving excise tax on Pilipinas Shell’s imports of Catalytic Cracked Gasoline (CCG) and Light CCG (LCCG), stressing that these are mere blending component used to manufacture unleaded gasoline and not the end-product itself.

This as the Bureau of Customs (BOC) and Shell remain at loggerheads over the issue of exise taxes. The BOC has been trying to collect P21.4 bilion in excise taxes plus penalties from Shell for its imports of CCG in the last three and a half years. The amount has been ballooning due to penalties and charges.

The BOC has maintained that CCG is essentially a variant of unleaded gasoline and not merely a blending component but Shell refused to pay, saying that CCG is not an end product.

“As they were not going to be sold for consumption but for the manufacture of gasoline products that comply with the requirements of the CAA (Clean Air Act), they were not subject to the excise tax on importation,” Buñag said during the weekend.

Buñag said his position has been upheld by his predecessors in the BIR led by former commissioners Guillermo Parayno, Lilian Hefti and the recently-resigned Sixto Esquivias IV.

“It is interesting to note that BIR commissioner Guillermo Parayno, who is quite knowledgeable about customs matters, did not reverse my memorandum; neither did my immediate successor, Commissioner Lilian Hefti, pressed as she was for collections,” he said.

The BOC, Buñag said should leave the issue to the BIR as the agency is the expert on the issue.

“The BIR would probably be more familiar with the NIRC (National Internal Revenue Code), which it enforces on a daily basis. Customs officials would be experts in TCC (Tax Credit Certificates) issues,” he said.

The BIR, currently led by Acting Commissioner Joel Tan-Torres, has been quiet on the issue amid renewed efforts of BOC to press Shell for tax payments supposedly from its imports of CCG at least in the last three and a half years.

BIR Deputy Commissioner Nelson Aspe said the agency is standing pat with the opinion of Buñag which exempted CCG from excise taxes, citing it as a raw material for manufacture of unleaded gas.

“That opinion of former Commissioner Buñag remains,” Aspe said.

Finance Undersecretary Estela Sales earlier told a Senate budget hearing that a resolution on the matter would be forthcoming.

Esquivias, before resigning, has also told the Senate sub-finance panel of Sen. Miriam Defensor-Santiago that the 2004 Buñag opinion on the tax-exempt status of CCG remains in effect and is being upheld by his agency.

The Senate, for its part, has ordered the BIR˜to “resolve the issue in favor of the government when doubt arises.”

Last Nov. 11, the BOC served a demand letter to Shell, ordering the oil firm to settle the amount of P7.34 million representing excise taxes and value-added tax (VAT) for importations of unleaded gasoline from 2004 up to October 2009.

It was not immediately clear if the P7 million being collected by BOC was the new compromise amount of the pending back taxes of Shell worth P21 billion.

Customs Commissioner Napoleon Morales said the oil company should pay a total of P7,348,767.933 within 10 days from receipt of the demand letter, which was sent last Nov. 11, 2009.

Morales also ordered Shell to pay excise tax and VAT on all of its future shipments of unleaded gasoline. Shell has not made any payments yet.