European Chamber urges gov’t to resolve tax row between BoC, Shell

MANILA, Philippines—The European Chamber of Commerce of the Philippines (ECCP) is calling for the immediate resolution of the latest tax dispute between Pilipinas Shell Petroleum Corp. and the Bureau of Customs (BoC), warning that this may turn away prospective investors.

“The ECCP would like to have the issue settled and resolved at the soonest possible time. We do not want this to become another red flag for investors who are looking into the country as a possible destination,” ECCP president Hubert d’Aboville told reporters.

He was referring to the latest allegations that Pilipinas Shell defrauded the government by not paying the right excise taxes for import shipments of alkylate, which the oil company claims is a “blending component” and should not be slapped with such taxes.

“There has already been assessment from the Bureau of Internal Revenue that alkylate is a raw material and that an SGS Philippines analysis showed that it does not meet Philippine National Standards for gasoline,” d’Aboville said.

“The government of President Aquino from the start has sent a very strong message that it will never tolerate corruption and we believe it will make the correct actions in this issue,” d’Aboville added.

Pilipinas Shell had explained that alkylate was an intermediate product, which is further processed into finished unleaded gasoline. Only the finished products, it said, are subject to the payment of excise taxes before these are distributed to the filling stations.

Shell also pointed out earlier that a sampling and testing conducted by SGS Philippines last April that was witnessed by both the BoC and Shell, an alkylate shipment was tested and found not to meet the PNS specification for premium plus, premium and regular gasolines.

“Shell wishes to also point out that the BIR, the government agency exclusively tasked to implement and interpret the pertinent provisions of the National Internal Revenue Code, issued an individual Authority to Release Imported Goods (Atrig) for all the alkylate importations involved in the subject claim. No excise taxes were paid on the shipments because they were all covered by the corresponding Atrigs issued by the BIR, which recognized the same to be raw materials and/or blending components,” Shell said.

“Shell has paid all the right taxes and strongly denies having engaged in any fraudulent activity, especially smuggling, as this is very much against its business principles,” it added.

The Department of Energy has since maintained that interim products, which need more processing to produce the final and finished products, should not be slapped excise taxes.

This was the position taken by the DoE since 2003, when it  wrote  the Bureau of Internal Revenue that catalytic cracked gasoline and light catalytic cracked gasoline were not finished products  subject to excise taxes.

Over the past years, the BoC has filed cases against Pilipinas Shell for allegedly evading import duties and taxes, the latest of which was the P24.5-billion suit against Pilipinas Shell for alleged “intentional misclassification and misdeclaration” of its various petroleum imports from 2004 to 2009.

Shell maintains that it has paid all the right taxes “and strongly denies having engaged in any fraudulent activity, especially smuggling, as this is very much against its business principles.”

It further noted that it has consistently been on the top 10 taxpayers’ list of the government and over the last five years, its annual tax payments have averaged about P26 billion per year.