Finders keepers, losers weepers

Is it about collecting unpaid taxes for the Republic of the Philippines or is it about collecting a 20 percent finders fee amounting to P1.4 billion without having to fight Pacquiao, Cotto or Mayweather?

Whatever the motives, a three-way fight between the Bureau of Customs, Pilipinas Shell, and the Bureau of Internal Revenue may ultimately result in some people making money while many Filipinos end up weeping.

The Bureau of Customs recently slapped a collection notice on Pilipinas Shell for P7.2 billion as unpaid excise tax for imported catalytic cracker gasoline from 2004 to 2009. As the name suggest CCG is a catalyst or something you combine with Shell’s locally refined gasoline to make unleaded gasoline that will comply with the Clean Air Act and Philippine Standards of 93 Octane rating.

Pilipinas Shell imports the CCG because it would be more efficient in terms of production without having to make massive financial investments for a full refinery. As the saying goes: Why buy the cow when you can buy milk in a bottle? At the end of the day, once Pilipinas Shell manufactures the finished product, they pay the full tax to the BIR for every liter of unleaded gasoline that comes out of their Batangas refinery.

According to the Department of Energy and the Bureau of Internal Revenue, CCG or catalytic cracker gasoline is a “raw material” which is not sold directly to the market or is not sold as a finished product, therefore it is not subject to the excise tax that the BOC wants to collect.

Based on those opinions, the BOC position is technically incorrect. In addition, if the BOC were allowed to impose such an excise tax, it would inflate the cost of raw materials that would inflate the cost of the finished product. The BOC would also end up taking away revenue collections that the BIR is suppose to collect based on the finished product.

In effect, the Bureau of Customs is either trespassing or grabbing BIR territory.

A curious angle to this nightmare is that the Bureau of Customs is five years late in collecting what they claim is due them. The problem is the present Customs Commissioner was once the collector of the BOC in the Province of Batangas where the failure to collect excise tax happened for several years.

If the position of the Bureau of Customs is legitimate, whoever is responsible for failing to collect P7.2 billion clearly did not do his or her job which resulted to financial losses for the Philippine government. Under such circumstance, one thing that should be happening now is that charges of graft and corruption, ignorance of the law etc should be or should have been filed with the Office of the Ombudsman against Customs officials.

Instead we now have the people who failed to do their jobs, making threats against Pilipinas Shell and ignoring factual and legal opinions made by the Department of Energy and the BIR.

After the very disruptive effects of EO 839, it seems that the people at the BOC have not fully appreciated the truth and the reality that when pressed between a rock and a hard place multinational companies can and will choose to reduce their losses by scaling down operations or simply moving out until there is a better business environment.

If EO 839 annoyed foreign investors, this recent vendetta of the Bureau of Customs has certainly caused decision makers abroad to seriously study the future without the Philippines. Commissioner Morales tries to downplay this possibility. Perhaps he should review how many major brands and players pulled out of the Philippines, moved to Thailand, Indonesia and Vietnam.

What we have left in the Philippines are merely official distributors or sales offices who sell finished products but no longer have offices, factories, manufacturing etc. We lost jobs, rentals, utility payments, contributions to SSS and PhilHealth, national and local taxes as well as assistance to public projects via Corporate Social Responsibility or CSR projects. 

I don’t want to falsely accuse BOC officials of having vested interests, but there is a growing suspicion that aside from being a vendetta for the backlash of EO 839, this recent anti-business move of the BOC may have been triggered by a group interested in cashing in on a “finders fee” once the “uncollected” taxes are squeezed out of Pilipinas Shell.

The threat of the BOC to confiscate or embargo all future CCG shipments or raw materials of Shell would be very interesting to see in action. NO CCG = NO Shell fuel products. You can all look forward to another round of fuel shortage, black market sourcing and disrupted transport operations in the entire archipelago brought to you by tax experts at the Bureau of Customs.

This mess reminds me of a story about a Filipino executive who took a course under a respected economist who studied regional corruption versus bad government policy. In his lecture the esteemed professor pointed out that corruption is a regional reality.

Whether it is Vietnam, Indonesia, Malaysia even Singapore, the truth is, there is some level of corruption that goes with business and government. But corruption alone does not cause economic downfall as proven by the growth of these countries.

What seriously causes economic downfall and suffering to a nation and its people is corruption coupled with bad government policies.

After the lecture, the professor approached one of his favorite students and said: “I did not want to embarrass you, but the fact of the matter is that the Philippines is the “perfect example” of how corruption and bad government policies hurts a country’s economy.