OSG hit over Shell bond to settle P7.3-billion taxes

MANILA, Philippines - The Bureau of Customs (BOC) is set to question a move by Solicitor General Alberto Agra to accept the offer of Pilipinas Shell Petroleum Corp. to post a surety bond to allow the oil firm to settle its reported P7.34 billion in back taxes.

BOC Batangas Port collector Juan Tan said he believes there could be some irregularities in the move of Agra, who President Arroyo appointed last week as justice secretary. It was not clear whether Agra would be replaced as Solicitor General or hold the post in concurrent capacity.

Tan told BOC Commissioner Napoleon Morales that he was not informed by the Court of Tax Appeals that Agra has accepted the offer of Shell to post a surety bond in exchange for an assurance that assets would not be seized by the authorities in connection with its tax row with the government.

Tan said this counters an earlier agreement between the oil firm, Department of Finance (DOF) and the Office of the President that Shell will have to set up an escrow account equivalent to P7.34 billion.

Tan said a surety bond does not require Shell to release the contested amount from its coffers but will just pay a third party to assure the government that the entire P7.34 billion will be paid if the court rules in favor of BOC. In this case, Shell will pay its third party a premium of P1.3 million, he added.

“(W)hat PSPC (Shell) did is tantamount to giving PSPC unwarranted benefits at the expense of the government because PSPC will then be allowed to keep and use the said P7.34 billion of the government without any consideration,” Tan said in his letter.

He said Shell is already selling some of its Philippine assets in case the court rules in favor of BOC. The Office of the Solicitor General (OSG) and DOF, not the BOC, are in talks with Shell over its alleged P7.34 billion worth of back taxes.

Tan also questioned Agra’s acceptance of Shell’s surety bond offer since he is new to the post, and the fact that OSG officials Thomas Laragan, Bernard Hernandez, and Amparo Cabotaje-Tan – who handled the case from the start – did not sign the acceptance document.

“Being new to OSG, Solgen Agra could not have known all facts of the case and it was irregular and improper for him to act on the same as he did without the knowledge and participation of the concerned lawyers of OSG,” he added.

Tan said Agra accepted the proposal of Shell on Feb. 26.

It was Tan who recommended that Morales go after Shell for the importation of catalytic cracked gasoline (CCG) and light CCG since 2004 to 2009.

Shell said the two products should not be subject to an excise tax since the oil firm will still refine them in order to create unleaded gasoline.

The BOC said the CCG and LCCG are already gasoline and therefore should be slapped with excise tax at a rate of P4.35 per liter.

On behalf of the Bureau of Internal Revenue, the BOC collects excise taxes at the source before the product is sold to the market. At the moment, Shell is still importing the said products and paying the excise tax under protest.