MBC hits ‘unstable’ government tax policies

MANILA, Philippines – The Makati Business Club (MBC) has criticized the alleged “instability of government policies and regulations” after the government ordered Pilipinas Shell Petroleum Corp. to pay back taxes.

“We believe the main issue remains to be the instability of government policies and regulations,” read the MBC statement.

“The retroactive application of a ruling imposes a crushing burden on Pilipinas Shell, which had taken on good faith a Bureau of Internal Revenue opinion in settling its previous tax obligations, an opinion upheld by four BIR commissioners from 2003 to 2009.”

MBC warned the government that the Pilipinas Shell case sends a “chilling message” to potential investors because it speaks of the unreliability of government in implementing its own regulations with consistency.

“ We call on government to be fair and consistent in applying its regulations to all, including Pilipinas Shell,” read the statement.

This is reminiscent of the case of the Yukos Oil Co. in Russia where the government retroactively declared the company’s tax practices illegal and gave it only days to pay billions of euros in back taxes after freezing the company’s assets, MBC said.

The dispute between Shell and the government was resolved after the Office of the Solicitor General accepted and the Court of Tax Appeals approved Shell’s issuance of a bond to secure their alleged tax deficiency in the importation of catalytic cracked gasoline and light catalytic cracked gasoline from 2004 to 2009.

Inconsistencies caused by whistle-blower reward

MBC said policy inconsistency in government appears to be driven, not by the sole objective to increase government revenues, but also by individual consideration.

“We have reliable information that a major motivation for this sordid flip-flopping is the desire of certain government officials to collect a 20 percent whistleblower reward of P1.46 billion for collecting back taxes they should have been collecting on a regular basis in the first place,” read the statement.

The National Internal Revenue Code rewards whistle-blowers five percent of the value or P1 million, whichever is lower.

On the other hand, the Tariff and Customs Code provides for rewards of 20 percent of the value, without limit, and allows government officials to receive the reward.

MBC said the Tariff and Customs Code provisions have only encouraged harassment and extortion by government officials who are tasked to collect revenue for the government.

“We believe that the National Internal Revenue Code, adjusted for inflation, is the more appropriate basis for the whistleblowers’ reward,” read the statement. –Ma. Elisa Osorio (The Philippine Star)