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Shell owes gov’t P21B in back taxes says Bureau of Customs

But oil firm denies claim

By Lira Dalangin-Fernandez
First Posted 15:25:00 02/10/2009

MANILA, Philippines – A giant oil firm has been defrauding the government of some P21 billion in taxes and penalties involving the importation of a component of unleaded gasoline since 2006, the Bureau of Customs has claimed.

Pilipinas Shell was importing unleaded gas but was passing it off as catalytic crack gas (CCG) to avoid paying excise tax, according to lawyer Juan Tan, customs district collector of the port of Batangas.

Since 2006, Tan said Shell should have been paying the government some P3 billion pesos in excise tax.

The amount has ballooned to P21 billion, including penalties, which would allow the government to collect five to eight times the principal amount “if there is fraud,” Tan said at the hearing of the ways and means committee on leakages in tax collections at the House of Representatives Tuesday.

On questioning by Camarines Norte Representative Liwayway Vinzons-Chato, the Bureau of Internal Revenue said that it released an opinion in 2003, during the time of Commissioner Jose Mario Bunag, exempting the importation of CCG from payment of excise tax.

The BIR said it arrived at the opinion based on the recommendation of the Department of Energy that CCG was not a finished product.

But Albay Representative Edcel Lagman said that the exemption benefited only Shell, since no other oil company was importing CCG for its unleaded gas.

“They got exemption from the BIR solely for their own benefit because others are not importing,” he said.

Tan said they gave Shell the demand letter last Friday, seeking the company’s comment in 10 days.

Lawyer Nigel Avila, Shell’s country tax manager, said CCG was not the finished product but a “blending material” for the unleaded gasoline.

But Tan countered that in the invoice prepared by Shell’s supplier, the product was identified as “Unleaded Gasoline” with CCG placed in parentheses.

“If it’s CCG, why state it as unleaded gas?” Tan said.

Tan also noted that in the latest shipment of Shell which arrived Monday, the firm was now applying for a special permit to discharge “special premium mogas” and “semi-processed gasoline blending component.”

Avila said that unleaded gasoline was not a finished product, “it’s a generic name.”

“Unleaded gasoline is a generic name and CCG is a variant or grade of ULG,” Avila clarified.

Leyte Representative Andres Salvacion Jr., the acting chairman of the committee, said it was important to “dig deeper” into the issue since this involved collection of taxes.

Chato said the Bureau of Customs should be able to determine if the product being imported by Shell was just a component of unleaded gasoline.

Palawan Representative Abraham Kahlil Mitra asked Avila if CCG could make a car run.

“If you put it in your car, will it run?” he said, to which Avila replied, “No.”

Avila said Shell imported 300,000 barrels of CCG per month through the port of Batangas. The product is being processed in its refinery in Tabangao in the province.

But on questioning by Cavite Representative Jesus Crispin Remulla, Avila said they were also importing diesel gas using the Subic port.

Remulla said he was “mystified” that Shell had to use the Subic port when it could use the Batangas port. He said the oil firm could be “taking advantage of the freeport area as a drop off point.”

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