Government offers Shell compromise deal

MANILA, Philippines - The government has offered Pilipinas Shell Petroleum Corp. (Shell) a compromise on the controversial issue involving the oil firm’s alleged unpaid import tax arrears amounting to P7.3 billion.

Finance Secretary Margarito Teves said that as a compromise, Shell can place the amount in an escrow account until all the legal issues are ironed out in court.

“We offered as a compromise solution to them is for Shell to open an escrow account,” Teves told reporters.

An escrow account is a third party account which can be tapped upon the fulfillment of certain conditions or the settlement of issues.

Teves said Shell can pay the amount on a staggered basis if it cannot raise the full amount of P7.3 billion.

The issue stemmed from Shell’s refusal to pay for import taxes on catalytic cracked gasoline (CCG) and light catalytic cracked gasoline (LCCG) imported by Shell between 2004 and 2009.

Teves nonetheless maintained the position of the government that Shell needs to pay the amount. However, we’d like to help Shell be able to handle this, Teves said.

The Bureau of Customs (BOC) is going after Shell’s imports but the oil company has obtained a restraining order from a Batangas regional trial court.

Shell has gained a 20-day temporary restraining order versus the BOC’s planned seizure of its fuel imports.

In a three-page decision issued last Wednesday, Batangas City Regional Trial Court judge Ruben Galvez of Branch 84, awarded Shell the restraining order. Galvez said more time was needed to decide on the legal issues raised in the case.

The new TRO issued by the Batangas court came a day after the Court of Tax Appeals rejected Shell’s petition for a permanent injunction while the tax dispute was being heard.

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

BIR Commissioner Joel Tan-Torres has already reversed the Buñag ruling and agreed with the BOC that the products are subject to tax.