Shell blames double taxation for looming oil shortage in RP

MANILA, Philippines - Local oil refiner Pilipinas Shell Petroleum Corp. blamed yesterday the Bureau of Customs’ insistence on double taxation as the cause of a looming oil shortage in the country.

“Our economy should not be sacrificed as the govenrment finds way to plug its (revenue) collection shortfall,” Shell legal counsel and former Ombudsman Simeon Marcelo said.

He said the issue is already before the Court of Tax Appeals. “We hope that the CTA will intervene before Feb. 9 to stop the planned seizures by the BOC.”

But the Bureau of Customs (BOC) and the Bureau of Internal Revenue insisted Shell cannot evade payment of its taxes on its importations of unleaded gasoline by threatening to stop the production and importation of petroleum products bound for the country.

“That is tantamount to blackmail,” BOC Commissioner Napoleon Morales said.

The BOC official said Shell previously declared in its import documents up to 2004 that it was importing unleaded gasoline (catalytic cracked gasoline) for sale, which made Shell liable to excise taxes.

Rep. Juan Miguel Arroyo, chairman of the House committee on energy, said if other oil players have been religioulsy paying excise taxes for the unleaded gasoline imports, then Shell – the second largest oil firm in the country – should also do so.

“While I recognize the fact that it is Shell’s prerogative to continue or stop conducting business here, I call on its management to settle their tax obligation instead of threatening to close shop if they are forced to pay their unsettled taxes,” he said.

Meanwhile, Consumer and Oil Price Watch (COPW) chairman Raul Concepcion said the Department of Energy’s contention that there may be a shortage in oil supply in case Shell closes its plant just creates panic, which in turn may cause oil prices to go up.

“At the very least, Petron and global importers Chevron and Total, and even the new players should be able to increase their importations to cover the country’s oil requirements and fill the void that may be created by Shell’s shutdown,” Concepcion said.  

“We cannot be held hostage by Shell nor by the statements of the Energy Secretary,” he added.

“We will then request the intervention of the President to resolve this issue because it involves a substantial revenue implication to ensure that Congress, with only 15 session days remaining, can make the necessary amendments to the law,” the COPW chief said.

Earlier, Shell said it is trying to seek the intervention of the Department of Finance (DOF) and Malacañang on the issue of its alleged tax deficiencies.

“We have ongoing communications with the DOF and Malacañang on this,” said Mylene Santos, Shell’s communications manager for downstream.

But she admitted that the company has been drawing up worst-case scenarios, including a possible refinery shutdown.

She said they would also exhaust all legal means in case the CTA rules in favor of the government.

“We will definitely bring this to higher courts,” she said, noting that as a natural consequence of the government’s threat to seize some P43 billion worth of its imports would be a closure of the refinery.

However, Shell vice president for manufacturing Arnel Santos said the operations of the refinery remains on “business as usual” mode.

“We are now explaining the possible consequence. But as of now, it’s business as usual for the refinery. We are producing normally and we have not experienced any disruption in the production. What is happening now is that we are explaining what could happen in the refinery and supply should the seizure materializes. As far as further engagements in the future, I have yet to be updated,” he said.

He said the inventory of the company is on normal level. “As of now, we have enough inventory and we’re not even slowing down in our production,” he added.

On the average, Shell said its inventory can cover 10 to 20 days of supply.

Santos said if the government seizure pushes through, Shell, which been in the  Philippines since the 1960s, would incur P11 billion in losses.

Shell, following the case filed by the BOC against the oil firm on alleged tax deficiency assesstment, maintained that it complies with the 2004 ruling of the BIR that importation of CCG is not subject to excise tax.

“It was clear in the past, as early as 2004, there was already a clear ruling that it’s a raw material, not a finished product, and recently there was a BOC investigation report which came out, that for 2009 only which validated that we are actually not selling the CCG,” he said.

Shell also reiterated that the DOE, which is really the expert authority on that aspect, actually had ruled that they are raw materials.                       — With Delon Porcalla