'Oil supply shortage possible if tax row is not solved'

MANILA, Philippines - The Department of Energy (DOE) said there could be a shortage of oil supply in Metro Manila if the Bureau of Customs (BOC) seizes P43 billion worth of its imports.

“(I) have not seen the BOC order. But if indeed BOC confiscates the imports of Shell, there will definitely be some disruptions,” Energy Secretary Angelo Reyes said.

The BOC earlier threatened to confiscate $923 million future shipments of the oil firm from February to May 2010 as payment for the alleged back taxes for the importation of Catalytic Cracked Gasoline (CCG) and Light Catalytic Cracked Gasoline (LCCG) from 2004 to 2009.

Shell is disputing the BOC’s tax assessment before the Court of Tax Appeals (CTA), contending that CCG and LCCG are merely raw materials for the production of unleaded gasoline.

The oil firm said the assessment has no basis because excise taxes are only levied on finished products for consumption and sale in the domestic market.

Reyes said Shell plays a major role in the supply chain of petroleum in key cities of Luzon, having a 2.7 percent market share, second to leading oil industry player Petron Corp.

Shell, a member of the Royal Dutch Shell group, supplies 33 percent of the fuel demands of power plants including the National Power Corp. (Napocor), 17.2 percent of the aviation market, 24.6 percent of the marine transport market; and 70.2 percent of the bitumen demand by contractors engaged in road works.

Reyes said the DOE and the Bureau of Internal Revenue (BIR) share opinion that Shell did not incur tax deficiencies when it imported the raw materials because excise tax is levied on the final product.

“The DOE and the Bureau of Internal Revenue (BIR) have shared the same position that there is no tax deficiency by Shell in its import of gasoline blending stocks to meet Clean Air Act requirements,” he said.

“Final tax is levied as gasoline leaves the refinery for sale to the market. The BOC insists to collect tax on the intermediate product,” he added.

Shell legal counsel and former ombudsman Simeon Marcelo said the BOC’s demand constitutes double taxation since Shell already paid billions in taxes for finished products withdrawn from its refinery.

“The threatened seizure is unjust, premature and oppressive. BOC is threatening to seize Shell’s shipments even if the supposed liability has yet to be determined with finality. There is still a pending case before the CTA on this issue. – Donnabelle Gatdula