DoF cracks down on oil smuggling

P10-B losses annually DoF cracks down on oil smuggling

By LEE C. CHIPONGIAN, MB

The Department of Finance said the government is losing almost P10 billion a year in potential revenues due to petroleum smuggling.

DoF Secretary Margarito B. Teves said that based on industry estimates, the government could collect P7 billion more in excise taxes and about P2.5 billion in import duties every year if oil smuggling is stopped. "It is something we need to correct (because) we need the revenues," Teves said.

On Monday the DoF announced that tax collection agencies, the Bureau of Internal Revenue and the Bureau of Customs have signed a memorandum of agreement with the Philippine Institute of Petroleum to jointly combat oil smuggling.

According to Teves, this MoA "is particularly significant in light of the escalating prices of diesel and other fuels in the world market." Last month crude oil price in the world market soared to an all-time high of past $70 a barrel. This prompted the Department of Energy to issue a warning that gasoline prices could increase by as much as R3 per liter in the coming months.

In the meantime, Teves added that the MoA would effectively prevent smuggling of fuel products, which have become more prone to smuggling because of the rising prices.

The agreement between the agencies will make smuggling more difficult because it will help in producing the evidences to prosecute smugglers, said Teves. "While the BoC has apprehended suspected fuel smugglers, the lack of incontrovertible evidence has made it difficult for them to confiscate the products or prosecute the offers."

The DoF said other proposed measures to combat fuel smuggling are the deployment of fuel marking technology that will help authorities trace illegally sourced petroleum.

To discourage oil smuggling, the DoE is also considering the establishment of a common oil depot, which can import directly from abroad. The proposals are now with the DoF. A common oil depot will make it easier for the BIR and BoC to monitor imported fuel.

The MoA signatories were BoC officer in charge Alexander Arevalo III, BIR officer in charge Jose Bunag and PIP Chairman Edgar Chua. Witnesses to the MoA signing were representatives of Petron Corp., Caltex Philippines Inc., Total (Philippines) Corp. and Subic Bay Distribution Inc.

Teves said the main objective of the DoF is to improve tax collection and to crack down on all smuggling activities, which rob the country of precious revenues.

Again the DoF chief reiterated that once the expanded value added tax law is implemented, this would improve revenues by P15 billion by the end of the year. "The government is committed to the implementation of the VAT law upon the lifting of the temporary restraining order," said Teves.

The government has lined up several measures to mitigate the effects of the surging oil prices and the new VAT law on domestic prices since implementation of VAT will hit energy and petroleum products.

To lessen the impact of the new VAT on prices, the DoF will implement the following:

The removal of excise taxes on diesel, kerosene and bunker fuel oil. This will translate to a reduction in price for diesel by as much as P1.63/liter.

The sale of power by non-oil generating plants like geothermal, hydro, and solar has been zerorated. This effectively reduces the cost of electricity and encourages the use of renewable energy sources.

The import tariff on petroleum products will be reduced from 5 to 3 percent except for LPG, which will remain at zero. This will translate to a reduction in price by as much as P0.50/liter