DOF to study CREATE ‘insertions’ amid calls for veto
The Department of Finance (DOF) will look into the items in the Congress-approved version of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act that advocate group Action for Economic Reforms (AER) wants vetoed by President Duterte.
The AER had warned about the “questionable” CREATE provisions: local oil refineries’ exemption from duties and taxes, plus inclusion of crude oil refining in the Strategic Investment Priorities Plan; exemption of legislative franchises’ tax perks from the Fiscal Incentive Review Board’s and presidential scrutiny; and higher value-added tax-exemption cap for the housing sector.
“As far as I know, this bill has yet to be enrolled by the legislature and submitted to the Office of the President. We will study the final enrolled bill as well as the items [raised by AER],” Finance Secretary Carlos Dominguez III said.
While the DOF spearheaded the push for CREATE’s passage, which the agency said would help spur the recession-hit economy, Dominguez noted the contentious items did not come from the agency.
“We proposed the measure, but as you know, the legislature does not necessarily pass any proposal in toto,” Dominguez said.
AER had said these “insertions” in CREATE, which were allegedly done in a closed-door bicameral conference committee, would benefit conglomerate San Miguel Corp. (SMC) the most. SMC earlier secured a franchise for its Bulacan airport project, while affiliate Petron Corp. is now the lone oil refinery in the country.
“Keeping our remaining oil refinery [Petron] is more of an emotional reaction than it is a sound economic policy,” AER had said. “Framing this as an issue of national security is a tired argument.”
It had said standalone refineries could no longer “compete with larger, integrated end-to-end refineries with petrochemical complexes.”
There were as many as three crude oil refiners in the country in recent years.
Chevron Philippines shuttered its Caltex facility in Batangas in 2003, just five years after market reforms kicked off through the Downstream Oil Industry Deregulation Act of 1998.
The American firm cited the increasing competition in the Philippine market as well as depressed refining margins due to overcapacity. The refinery was converted into an import terminal for refined products.
Pilipinas Shell followed suit in 2020, blaming pandemic-hit margins, among others.
Petron, the remaining player standing has been complaining of a tax regime skewed in favor of fuel importers and at the expense of local refining operations.
AER had said that while the fiscal environment was an “easy scapegoat” to blame for Petron’s problems, it said local refineries were not economically viable.
The Philippines does not have the comparative advantage nor the economies of scale to be competitive in oil refining, according to AER.
The group also argued the real problem of local oil refineries was the Department of Energy’s requirement for an inventory of at least 60 days’ worth of refined petroleum products. In comparison, importers need to maintain only 14 days’ worth of fuel stock.
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