Palace urged to intervene in Shell, Customs tax dispute

MANILA, Philippines - A big business group in Cebu has asked Malacañang to intervene in the tax row between Pilipinas Shell Petroleum Corp. and the Bureau of Customs.

In a statement, Cebu Business Club, an independent organization of businessmen and professionals in Cebu, said: “We express our grave concern over the government’s abrupt change of policy that now requires Shell to pay taxes and retroactively for the importation of catalytic cracked gasoline and light catalytic cracked gasoline that it uses as a raw material for the production of refined gasoline locally.”

Former Bureau of Internal Revenue Commissioner Jose Mario Buñag issued a legal opinion in 2004 that the importation of the two products, being raw materials, is exempted from excise tax. But five years later, incumbent BIR head Joel Tan-Torres reversed Buñag’s ruling and agreed with the Bureau of Customs that the two products were subject to tax.

“Before committing to invest, businessmen expect fair, consistent and predictable rules to follow to enable them to determine the viability of their investments. If these rules are changed in the middle of the game, what signal will this give prospective investors in the country?” CBC said.

According to the CBC, Shell paid excise taxes for its finished gasoline products totaling more than P34 billion from 2004 to 2009.

The group argued that forcing Shell to pay an additional excise tax amounting to P7.35 billion for the same years on its imported inputs “will constitute double taxation - and a flip-flop on an earlier, validated ruling.”

It said double taxation will discourage local production and encourage direct imports of finished products in the present manner of Chevron, Total, and other independent players in the oil sector.

“We at CBC are asking for the Finance Department to intervene and compel the Internal Revenue/Customs to cease their attempts to collect these unfairly levied back taxes in the spirit of the earlier rulings that confirmed the exemption of these products from taxes,” CBC said.

The Philippines, the group noted, is already one of the laggards in attracting direct foreign investments in Asia and such inconsistencies on the application of the laws and rules discourage foreign investments and inhibit the creation of new badly-needed jobs that will help lift many Filipinos out of poverty.

“This is not the first time the government has flip-flopped to the disadvantage of investors. This is a serious issue for potential investors,” the CBC said.