Loophole enabled oil firms to avoid P10.5b in taxes

THE three oil companies avoided paying P10.5 billion in excise taxes in 2010 by offsetting their tax liabilities using the tax credits of the garment industry, which they had bought at a discount of as much as 50 percent, the hearings of the Senate and House oversight committee on tax reform program have revealed.

As a result, Shell, Petron and Caltex paid only P9.7 billion in excise taxes in 2010, or less than half the total that they were supposed to pay, according to Senator Ralph Recto, co-chairman of the Congressional oversight committee.

“That’s P10.5 billion, so that wipes out the entire collection of the BIR on petroleum, which is P9.7 billion,” Recto said.

“You now issue tax credit certificates of P10.92 billion with P10.5 billion attributable to the usual suspects, the three oil companies. That, in effect, wiped out everything that the Bureau of Internal Revenue collected.”

The P10.5 billion aside, the government also incurred P5.8 billion in foregone excise taxes on diesel, Isabela Rep. Giorgidi Aggabao said.

Recto agreed and said the excise tax on diesel was removed when the 12-percent value added tax was imposed in 2004.

“We removed the excise tax on diesel because we thought it would help the consumers, but that was not the case since it did not necessarily mean that the consumers benefited,” Recto said.

“It just added to the profit of the companies.”

Recto said he was particularly annoyed to learn that the collection in excises taxes from tobacco and alcohol was bigger than that collected from petroleum products, which showed the discrepancy in tax burden-sharing.

Of the P67 billion in excise taxes collected, P53 billion came from alcohol and tobacco, according to the figures provided by Internal Revenue Commissioner Kim Henares.

The rest came from the mining industry (P1.17 billion), the automotive industry (P2.4 billion), and the petroleum companies (P9.7 billion).

Customs Commissioner Angelito Alvarez said the tax credits used by the oil companies were allowed by the Finance Department.

“I do not think the rules have changed with the assumption of the new administration with regard to the approval of the tax credits,” Alvarez said.

“So I have reasons to believe that [the department] even up to this point allows the trading of tax credits.” –Christine F. Herrera, Manila Standard Today