Reyes to meet BIR, BOC officials on Shell tax issue

MANILA, Philippines - The Department of Energy (DOE) is expected to clear the air today on the tax issue involving Pilipinas Shell Petroleum Corp. 

Energy Secretary Angelo Reyes is meeting with officials of Bureau of Customs and Bureau of Internal Revenue (BIR) a day before the expiration of a temporary restraining order (TRO) stopping the seizure of Shell’s imports.

Reyes had said that the government is trying to resolve the tax issue to avert a disruption in the supply of petroleum products. Shell accounts for about 30 percent of the supply in the market.

“We are trying to solve this at the level of the Department of Finance (DOF) and the DOE,” he said. BOC is a revenue collection agency of DOF.

The House ways and means committee and some big business groups have supported Shell’s claim that it should not be levied excise taxes on its importations of catalytic cracked gasoline (CCG) and light catalytic cracked gasoline (LCCG).  

A report signed by 38 congressmen and released last Jan. 27 considered the BIR ruling as “a naked, arbitrary, and whimsical abuse of administrative power by the commissioner of Internal Revenue and a usurpation of the power to tax solely vested in Congress by the Constitution.”

The ways and means committee, chaired by Rep. Exequiel B. Javier, is responsible for initiating all tax laws. It based its report on hearings that it conducted last year.

BIR Commissioner Joel Tan Torres issued the controversial ruling imposing excise taxes on CCG and LCCG imported by Shell after the Bureau of Customs (BOC) slapped Shell with a P7.3-billion deficiency tax assessment on said importations despite prior BIR rulings to the contrary. Business groups expressed concern over the sudden change in the rules.

Before the reversal, the BIR has consistently ruled since 2004 that CCG and LCCG are “not finished gasoline products intended for use by end consumers” and are not subject to excise tax upon importation.

The ways and means committee found that the Tan Torres ruling “is arbitrary as it lacks factual and legal basis.”

It further stated that “a closer analysis of the [Tan] Torres ruling clearly discloses that it is a very strained interpretation of the excise tax provisions of the [National Internal Revenue Code] NIRC which results in absurdity.”

The report pointed out that the DOE, “which is the primary agency in the implementation and enforcement of laws relating to petroleum products,” had ruled that “the importation of LCCG and CCG as raw materials on blending components in the production or processing of gasoline in its finished form should not be subject to excise tax.”