Continued fuel smuggling, tax system discourage investors—Total exec

Continued fuel smuggling and the changing rules in the Philippine taxation system are increasing the uncertainty for international companies to invest in the Philippines, according to Total Philippines president Ernst Wanten.

At the sidelines of a conference hosted by the Philippine Institute of Petroleum (PIP), Wanten noted that the huge challenges faced by investors in the oil industry remained the “same as they’ve always been” despite the government’s goal of achieving a “level playing field.”

“We’re on the same line with the government on the principle of [having a level playing field]. We can see that and we’re happy with that. It’s simply the capability of doing it, and the way they go about it [collecting tax or customs duties], which is inadequate,” Wanten explained.

On the issue of fuel smuggling, Wanten admitted that they have a “feeling that smuggling is increasing again.”

“We feel more pressure again from the same illegal players that’s always been there. And everything’s the same as before. There was a point, anyhow, after the new government came in last year, we felt there was a real reduction,” Wanten said.

Wanten added that the PIP, of which Total is a member, has been pushing for measures to curb fuel smuggling. “We’ve even proposed how to tackle it. But it’s more of putting it to work.”

As for the country’s taxation system, Wanten noted that while the oil industry was in favor of properly taxing everybody, the government, however, was not going after the players who were not paying taxes.

“What we’ve seen in the drive of the new government to increase tax collection is that, to us, it just looks like they are looking at [going after] the normal, legal companies. There is a drive to collect more, but we think the way they’re doing it is not good at all. They’re still not tackling the ones who are not paying taxes,” Wanten said.

“The basic [objective] of the drive [to increase tax collection efficiency] is correct. But the way they do it is what we’re not happy with. And it’s a general consensus among [oil] industry players. It also increases the uncertainty for international companies to invest in the Philippines,” Wanten added.

One of the uncertainties that might drive away investments was the Philippine taxation system whose rules, according to Wanten, were not clear and changed retroactively. And this setup, he said, was a unique thing in the world.

“The rules are not applied in a consistent way and it just increases the uncertainty of doing business in this country. The ideas are right in the government, but at the moment [these are] not rolled out in the right way and it could have a reverse effect,” Wanten warned.