COA: Malampaya must reimburse government P146 billion

MANILA, Philippines — The Commission on Audit (COA) has affirmed its earlier ruling directing the contractors of the Malampaya Natural Gas Project to reimburse the government P146.791 billion in underpayments.

In a 15-page resolution dated Jan. 24, 2018 but released only yesterday, the COA Commission Proper denied the respective motions for reconsideration of Malampaya consortium Shell Philippines Exploration B.V. (SPEX), Chevron Malampaya LLC, and Philippine National Oil Co.-Exploration Corp. (PNOC-EC) filed in June 2015 seeking reconsideration of the commission’s April 6, 2015 ruling directing them to pay P146.791 billion.

The COA also denied a similar motion for reconsideration filed by the Department of Energy, which was represented in the case by the Office of the Solicitor General (OSG).

Aside from the delayed filing of their respective appeals, the Commission said the appellants also failed to raise any new valid arguments that would warrant the reversal of the earlier ruling.

The commission maintained its position that the government’s share in the Malampaya gas project should not be less than 60 percent of net earnings in accordance with Presidential Decree 87 and PD 1459.

The commission said the contractors’ income taxes for the past 14 years, or from 2002 to 2016, totaling P146.791 billion should not have been passed on to the government as it decreased its share from the project to 34.03 percent while the consortium’s share increased to 65.97 percent.

COA has dismissed the OSG’s argument that there is no law barring the inclusion of income taxes in the computation of the government’s share in the Malampaya gas project.

The OSG said the arrangement that the government will assume the income tax obligation of the consortium is contained and agreed upon in Service Contract No. 38.

The OSG said the Notice Charged issued by COA in 2010, directing the consortium to repay the government their income taxes, was a violation of the principle of non-impairment of valid contractual obligations. The OSG said pushing the consortium to pay the income taxes already assumed by the government may cause “irreparable harm to the country’s long-term interest” as it might erode the confidence of foreign investors.

“It is the policy of the administration of President Duterte to honor the government’s contractual obligation under the same service contract,” the OSG added.