DOF rejects amendments to oil tax laws

Amid the fiscal difficulties posed by Petron in its refining business, the Department of Finance (DOF) indicated that it is not subject to proposed adjustments in the country’s tax laws applied to the downstream oil sector supply chain.

“We don’t need to change our tax laws on this,” said Finance Secretary Carlos G. Domínguez III, while emphasizing that refinery closures are happening around the world because margins are shrinking.

“The big oil companies have been closing their refineries in various parts of the world,” the finance chief said.

He explained that in a refinery business, “there may be market and timing problems, such as importing crude at a high price, then after refining, world crude prices could be lower, so refining margins they could be lower. “

That contrasts with the business model of oil importers, he said, in which they can sell their products right away, therefore making them “less vulnerable to movements in the price of oil,” and Domínguez opined that “it is actually a supply chain problem rather than a tax problem. “

Petron’s own CEO, Ramon S. Ang, acknowledged that “only Congress can correct (the tax laws), allowing us to pay taxes when we sell our products, just like importers.”

The Department of Energy (DOE), for its part, said it will analyze the fiscal concerns raised by Petron, but will carry out this process in coordination with the DOF.

The main concern of the department, according to the Secretary of Energy, Alfonso G. Cusi, is that they evaluate “how a closing scenario would affect prices, as well as the country’s energy security.”

In the Philippines, pump prices move weekly and it is often the dictates of market competition that prevail. Imperatively, the cost movements are based on the fluctuation of prices in the international market because the country has always depended on imports for 95 to 96 percent of its oil needs.

The DOE said it has not yet received a formal notification from Petron about its refinery closure plan. But when it comes to that business decision, the department said it will “respect management’s decision.”

Former Undersecretary of Commerce and president of Laban Konsyumer Inc., Victorio Mario Dimagiba, argued that oil refineries should have seen the writing on the wall long ago that the Tax Reform Act for Acceleration and Inclusion (TRAIN) was still in place. in deliberations.

“The fuel consumption taxes of the TRAIN law make refinery operations in the country no longer viable. Petron and Shell should have read this in 2018: that TRAIN was not fair tax policy in its part of the business, ”he said.

In relation to the changing landscape of the oil sector downstream of the country, Dimagiba proposes that the DOE should review the existing pricing formula, and that should already be anchored in an industry that relies on the importation of 100 percent of finished products, and such “may require an amendment to the Petroleum Deregulation Act.”