DoE backs Shell on excise tax row vs Customs

The Department of Energy has backed Pilipinas Shell Petroleum Corp.’s claim that the alkylate it was importing was an intermediate product used in the production of gasoline and, therefore, should not be slapped with excise taxes.

Energy Secretary Jose Rene D. Almendras explained that based on the definition found in the Philippine National Standards (PNS) guidebook, which defines what exactly a certain item is, alkylate was not fuel but a component additive.

“So it’s not even me judging the case. It is what the existing platform or the existing rule says. SGS Philippines (whose analysis showed that alkylate does not meet the PNS for gasoline) had the same opinion,” Almendras said.

“The thing is, alkylate is so expensive you cannot sell it in its raw form—that’s why it’s just additive. It’s more expensive than gasoline so even if you want to sell it as fuel you can’t,” Almendras added.

The Bureau of Customs alleged that Pilipinas Shell was defrauding the government by not paying the right excise taxes for its importation of alkylate.

The oil company claimed that this particular material was a “blending component” and, thus, should not be slapped with the said tax.

Pilipinas Shell earlier explained that alkylate was an intermediate product, which was further processed into finished unleaded gasoline product. Only the finished products, it said, were subject to the payment of excise taxes before they were distributed in pumping stations.

Shell also pointed out earlier that a sampling and testing conducted by SGS Philippines in April, under the joint request and witnessed by both the BOC and Shell, found that an alkylate did not meet the PNS specification for premium plus, premium and regular gasoline.

According to Almendras, the Department of Energy is not likely to conduct another similar test, unless requested.

The European Chamber of Commerce of the Philippines had earlier sought the immediate resolution of the latest tax row between Pilipinas Shell and the Bureau of Customs as it warned 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 at the country as a possible investment destination,” ECCP president Hubert d’Aboville earlier said.

“The administration 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,” he said.