OPINION: COLLECT TAXES FOR THE POOR
MANILA, FEBRUARY 3, 2010 (STAR) COMMONSENSE By Marichu A. Villanueva - At his age, deputy presidential spokesman for economic affairs Gary Olivar had to make a hard turn of 360-degree spin-around. This was a day after he announced that a presidential veto was an option being considered by the Palace for the Congress-approved exemption from the payment of 12 percent value added tax (VAT) by senior citizens in their 20 percent discount cards.The 54-year old Olivar post-haste clarified President Arroyo intends to sign this into law despite concerns raised by her economic managers of some P55 million revenue losses out of such VAT exemptions. That’s the low end of revenue loss based on the estimates of Sen. Pia Cayetano, principal author of the Congress-approved law on VAT exemption for senior citizens’ discount cards.
The vehement objection by the economic managers for such revenue-eroding legislation is expected. This is because the job to look for funds to replace these revenue losses falls on the lap of the economic managers. Such is the natural consequence especially when there is no source of funds provided for in the law to implement populist measures like this.
For sure, Finance Secretary Margarito Teves has only the welfare of senior citizens also in his heart. After all, Teves himself is a senior citizen. I just don’t know if he uses his 20 percent senior citizens’ discount card. As Finance chief, Teves is the head of agencies mandated to collect much-needed revenues to support basic public services for the people. This, he does, through the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC).
As the global financial crisis that started in 2008 continues to hover the horizon, both the BIR and the BOC are still reeling in their respective collection difficulties as evidenced by the further widening of the budgetary deficit. In simple language, a budgetary deficit is the difference between what the government earns (revenues and taxes collected) as against expenses. As it is, the government through the years continues to operate in deficit, or it spends more than it collects.
Thus, President Arroyo’s end game of a zero deficit by the end of her term in June is simply a pipe dream. Nonetheless, it is a welcome news that the President — who herself is a member of the senior citizens club — promises to sign into law the VAT exemption for senior citizens after all.
The immediate task at hand is how to replace these revenue losses. And this is the task of BIR Commissioner Joel Tan-Torres and BOC Commissioner Napoleon Morales. Fortunately, the two are working closely and in unison as in the instant case involving the collection of P7.34 billion of unpaid taxes from Pilipinas Shell.
I said in “unison” this time because this particular collection case against Shell originated from a previous memorandum issued by former BIR commissioner Mario Buñag in favor of this multinational oil company. This caused the legal issues that have reached the Court of Tax Appeals (CTA) where Shell elevated this to stop the Customs from enforcing its collection order.
In September last year, the BOC issued a demand letter to Pilipinas Shell to pay P7.34 billion in excise taxes on its unleaded gasoline imports from August 2004 to 2009. The oil firm originally declared their imports as catalytic cracked gasoline (CCG) and light catalytic cracked gasoline. It claimed that these were blending components and therefore “raw materials” that these were not subject to excise tax under Philippine tax laws. As then BIR chief, Bunag sustained Shell’s claims which were the grounds they invoked in their refusal to honor the Customs’ collection notice. Buñag’s opinion was subsequently overturned by Tan-Torres who cited new information that came to the BIR’s knowledge on this case.
The new information came out late last year after a post-entry audit that was annually conducted by the World Trade Organization (WTO) for trade facilitation. It turned out that Shell, one of the so-called “Big 3” oil firms in the Philippines — the other two are Chevron and Petron — has been enjoying undue advantage on their importations over the rest of the oil industry players.
By virtue of the Buñag opinion, it showed that Shell had used this to go around paying excise tax on its imported unleaded gasoline product. So its fellow oil industry players were also up in arms against Shell over this unfair competition while all along they pay the correct excise taxes on their imported oil products.
The BOC asserts the Shell’s CCG and LCGG shipments were finished products and not blending materials. Specifically, Morales cited applicable provisions of the National Internal Revenue Code of 1997 that prescribed excise tax on unleaded premium gasoline is subject to P4.355 per liter of volume capacity. It empowered the Customs commissioner and his subordinates to collect national internal revenue taxes on imported goods such as petroleum products.
Following Shell’s refusal to pay their tax dues, the Customs chief threatened to seize the oil firm’s imports for February and May worth $923 million to cover its tax deficiency as prescribed under the Customs and Tariff Code. Thus, Shell went to court and got a 60-day restraining order from the CTA against the Customs chief. Ironically, the TRO expires on Feb. 9, or a day before the Customs Bureau marks its 108th founding anniversary.
Shell cautioned BOC that seizure of their products might lead to shortage of gasoline and other petroleum products. And if BOC succeeds in their collection suit, Shell executives in the Philippines warned they may recommend to their mother company, The Netherlands-based Royal Dutch Shell to pull out from the operations here and close down their main oil refinery in Tabangao, Batangas.
Morales, himself a Batangeño, however, is unperturbed by Shell’s threats. He said he was assured by top executives of other oil industry players, including those from Petron and Chevron about their companies’ readiness to fill in whatever supply gap may arise which they don’t see happening. But the Customs chief is not closing the door on Shell and is in fact, willing to allow it to pay their tax dues even on installment basis.
Turning a senior citizen also later this year, Morales certainly would want to enjoy the full privilege of a 20 percent discount card when he retires.
Chief News Editor: Sol Jose Vanzi
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