Philippine oil firms back moves to reduce oil smuggling

Large oil firms operating in the Philippines on Monday expressed support for the government move to impose taxes on fuel products entering the country through the free port and economic zones, noting that this was one way to effectively curb oil smuggling.

Sally Monteiro, executive director of the Philippine Institute of Petroleum (PIP), which is composed of some of the country’s largest oil companies, said the ruling issued last month by the Bureau of Internal Revenue bodes well for legitimate oil players such as the PIP’s member companies that feel the impact of illegal activities.

PIP members include Chevron (Philippines) Inc., Liquigaz Philippines Corp., Petron Corp., PTT Philippines Corp., Pilipinas Shell Petroleum Corp. and Total (Philippines) Corp.

Monteiro said, however, that any initiative to curb rampant smuggling in the country must “not be too cumbersome for legitimate importers administratively.”

She added that while the intentions of the BIR ruling were “good,” there is still a need for the government to clarify administration and enforcement issues.

BIR issued last February 17 Revenue Regulation 2-2012, which states that “the value-added and excise taxes which are due on all petroleum and petroleum products that are imported and/or brought directly from abroad to the Philippines, including the free port and economic zones, shall be paid by the importer thereof to the Bureau of Customs.”

The BIR ruling was prompted by findings that crude oil products were being smuggled out of the free port and economic zones.

Crude oil products imported through the free ports are exempt from VAT and excise taxes, provided that these are used within the zones.

Unfortunately, some of the fuel products have found their way out of the zones and into the general market.

It has been estimated that the government loses P30 billion and P60 billion a year in foregone revenue due to oil smuggling.