Tax hike ‘unlikely’ the cause of Petron’s weak H1 income, says DOF

The Department of Finance (DOF) yesterday said it was unlikely that the decline in the first half earnings of the country’s largest petroleum refiner and distributor was caused by the fuel tax hike imposed by the government last year.

In a statement, Finance Undersecretary Gil Beltran said it was “highly unlikely” that the increase in fuel excise under the Tax Reform for Acceleration and Inclusion (TRAIN) Act led to a decline in Petron Corp.’s earnings for the first semester of 2019.

Beltran noted that other petroleum firms reported improved income performance in the same period.

Petron earlier said its first half earnings fell by 72 percent, adding that the price increases resulting from the TRAIN law’s implementation led to a decrease in its domestic fuel sales.

“We looked at their financials and it seems highly unlikely,” Beltran said, saying it was “misleading” for the firm to blame the tax hikes for the decrease in sales. “Shell reported that despite lower profits in the first half of 2019 compared to the same period in 2018, they saw higher retail volume growth across all business segments in the second quarter, which is the opposite of the Petron story.”

“In addition, Petron’s message that higher prices led to a decline in sales is inconsistent with its history,” he added.

The official said that, despite the rise in gasoline and diesel retail prices in the first quarter of 2012, Petron’s revenue still rose by 17 percent, or P10.6 billion, compared to the previous year. In the first half of 2012, when oil price was at its highest, Petron’s income grew by 43 percent.

“Perhaps Petron should look inward to understand the true cause,” Beltran said, noting that the firm had also reported a 78-percent hike in indirect expenses in the first quarter of 2019, “which suggests lower efficiency resulting in the income decrease.”

“Blaming TRAIN for their income drop is unwarranted,” Beltran said.