BIR reaffirms position on excise tax issue involving Shell

MANILA, Philippines - The Bureau of Internal Revenue (BIR) reiterated yesterday its position on the controversial excise tax issue involving Pilipinas Shell Corp. amid criticisms from local and foreign business groups.

BIR Commissioner Joel Tan-Torres stressed that the catalytic cracked gasoline (CCG) and light catalytic cracked gasoline (LCCG) imported by Shell are subject to excise taxes and as such, the company should pay taxes for these products.

The BOC is collecting P7.3 billion in excise taxes from Shell for its shipments of the two products, CCG and LCCG between 2004 and 2009.

However, Shell refused to pay, as it cited a previous legal opinion issued in 2004 by then BIR Commissioner Jose Mario Bunag which said that the importation of the two products are exempt from excise tax.

Tan-Torres reversed this position last month, saying that after looking into the issue, the agency has come to the conclusion that Shell should pay excise taxes for the importation of the two products.

The Philippine Chamber of Commerce and Industry (PCCI), the European Chamber of Commerce in the Philippines (ECCP) and the Employers Confederation of the Philippines (ECOP) have questioned the the BIR’s reversal of its previous position and its retroactive application of the imposition of excise tax on Shell.

The business groups said this reversal sends a negative signal to foreign and local investors on the kind of policy environment in the Philippines.

Tan-Torres maintained that the retroactive imposition of the excise tax was done by the BOC, which has been deputized by the BIR to implement and collect internal revenues taxes due on importation.

“There are legitimate instances when a retroactive imposition of tax can be done and I believe that the BOC took this into account when they acted on this matter,” he said.

However, the BIR chief said that while the tax agency is conscious of the rights of taxpayers, it is also mandated to implement the Tax Code. “When the Tax Code mandates a particular tax treatment, then that should be implemented even if this may be harsh for the affected taxpayers,” Tan-Torres said.

The BOC has threatened to seize P43 billion worth of assets of Shell in connection with the company’s alleged failure to pay the taxes.

Shell, which controls 30 percent of the local oil market, has warned of a supply shortage and possible shutdown of its Batangas refinery if BOC seizes its raw materials and imported products.