Customs to pursue Pilipinas Shell's tax liabilities of P21 billion

MANILA, Philippines - The Bureau of Customs (BOC) will go after an estimated P21 billion worth of unpaid excise and value-added tax (VAT) of oil refiner Pilipinas Shell Petroleum Corp., an agency official said yesterday.

“We really need to collect,” said BOC deputy commissioner Alexander Arevalo during a Congressional inquiry conducted by the House ways and means committee.

The committee is investigating Shell for allegedly defrauding the government P21 billion in unpaid excise and VAT and penalties on imported unleaded gasoline for more than a year starting October 2007.

Shell insisted it was not supposed to pay excise taxes for imported raw materials for making unleaded gasoline.

During the hearing , Shell spokesperson Roberto Kanapi said the company is importing raw materials and not the product itself, which is taxable.

However, Arevalo said the BOC could only act after a task force it had created to look into the matter concludes its investigation within the next two weeks.

The Bureau of Internal Revenue (BIR), for its part, is reviewing the legal opinion issued by then BIR deputy commissioner Jose Mario Bunag which stated that Shell should not be taxed for the imported raw materials.

The House committee started its investigation into the matter after receiving information from a certain Geronimo Pinar, a taxpayer and private citizen.

In a sworn statement dated Jan. 21 and submitted to the BOC, Pinar said from October 2007 to December 2008, Shell imported at least 1.6 million barrels of unleaded gasoline or equivalent to 257 million liters covered by 24 import entries.

“However, Pilipinas Shell has not paid any excise tax on the said imported unleaded gasoline,” Pinar said in his statement, a copy of which was furnished the ways and means committee and the Department of Finance.

BOC’s Port of Batangas district collector Juan Tan said the oil giant owes the government P3.2 billion in excise taxes, P383 million in VAT, and P17.8 billion in penalties for fraud, raising the total unpaid amount to P21 billion.

According to the Tax Code of the Philippines, imported unleaded gasoline is subject to an excise tax of P4.35 per liter.

Shell maintained it did not have any tax liabilities because the company imported catalytic cracked gas (CCG) which it uses in making unleaded gasoline.

The oil giant said it mixes CCG with gasoline from the refinery to produce Super Unleaded, the company’s unleaded gasoline brand.

The BIR had exempted CCG from excise taxes upon the Department of Energy’s recommendation “because it is a blending material, not a finished product.”

“We blend it with gasoline to comply with standards prescribed by the Clean Air Act,” Kanapi said.

He said Petron does not import the material since it has a CCG facility that extracts it from crude oil while Chevron (formerly Caltex) does not need CCG since it brings in finished products from abroad after shutting down its local refining operations.

Finance Undersecretary Estela Sales, for her part, said the department would issue a resolution on the matter once it has the positions of the both the BIR and the BOC.

Meanwhile, ways and means committee chairman and Antique Rep. Exequiel Javier warned yesterday of a possible shortage of oil products once the BOC carries out its threat to impound shipments of Shell.

Shell, the only other oil refiner in the country aside from market leader Petron Corp., has a 34 percent share of the local oil market.

“There will be a fuel shortage and a price spiral if BOC holds Shell’s shipments,” Javier said. — With Jess Diaz