It was in February 2009 that shipments of gasoline products were held by the Bureau of Customs in Batangas. And their owner, Pilipinas Shell, was told to pay a whopping P21 billion in duties, taxes, and penalties. This amount was supposedly to cover unpaid taxes and duties on Shell’s importations of such products from 2006 to until that time in 2009.
Back then, global business Shell found itself accused locally of violating tax laws.
Customs and tax agencies, meantime, were hard pressed to prove their case, as well as to defeat insinuations of a “shakedown.” But they stuck to their guns, even getting a boost from the defunct Office of the Presidential Adviser on Revenue
Enhancement.
Six years have since passed and the case remains unresolved.
Most of the personalities involved in that case, including Batangas Customs Collector Juan Tan and Presidential Adviser on Revenue Enhancement Narciso “Jun” Santiago have all moved on. Customs Commissioner Napoleon “Boy” Morales has retired, as well as other tax and Finance officials of that administration.
About a month ago, the Court of Tax Appeals, voting 8-1, came out with its latest ruling on the case.
In that decision, it ruled that “Pilipinas Shell Petroleum Corporation is liable for the unpaid excise taxes and VAT (value-added tax) for its subject Catalytic Cracked Gasoline (CCG) and Light Catalytic Cracked Gasoline (LCCG) importations for the relevant periods in 2006 to 2009.”
Despite this, however, the case is far from over. Appeals and new motions or petitions are expected, and it will probably take another five or six years -- and a new administration -- before this issue is finally resolved. And this brings one to this point: what is keeping the country from drafting and strictly enforcing clear and consistent policies in relation to taxes?
In my opinion, Shell, in importing CCG and LCCG into the country whether as a finished component or a blending component, made a business decision relying significantly on the opinion of tax administrators. Of course, with that decision came the risk of being overturned in court, as in this case.
Shell had argued that CCG and LCCG imported into the country as blending component for unleaded gasoline should not be subject to excise tax. And in this line, it had managed to secure at different times separate opinions from three Bureau of Internal Revenue (BIR) deputy commissioners and an Energy undersecretary to back up its claim for exemption.
On the other hand, Customs officials had insisted that under the law, CCG and LCGG, whether imported as blending component for unleaded gasoline or as finished products, were subject to excise tax.
No ifs, no buts.
In short, the exemption “opinions” from BIR were erroneous interpretations of applicable laws.
In resolving the matter, in its latest ruling, the Court of Tax Appeals backed the Customs bureau’s assertion. The court noted that the tax code was clearly worded with respect to importations subject to excise tax.
“Since the phrase ‘things imported’ was worded without any qualification, the Court is duty-bound to abide strictly by its literal meaning and to refrain from resorting to any convoluted attempt at construction.”
The Court had also ruled that if it had been truly the intent of Congress, through its tax laws, to exempt from excise tax fuel products such as CCG and LCCG for being mere raw materials for unleaded gasoline, then “it would have done so by expressing it using clear, concise, and appropriate language.”
On the matter of being taxed twice, on the raw materials and again on the finished product, the court also ruled that “unfortunately for [Shell, the law] neither provides a specific rule nor an exempting proviso on imported CCG and LCCG when used or consumed as raw materials. If at all, imported CCG and LCCG once reprocessed, re-refined, or recycled are subject again to excise tax.”
“Tax exemptions must be clear unequivocal. A taxpayer claiming a tax exemption must point to a specific provision of law conferring on the taxpayer, in clear and plain terms, exemption from a common burden. Any doubt whether a tax exemption exists is resolved against the taxpayer,” the court added.
As to the memoranda issued by three BIR deputy commissioners supposedly exempting Pilipinas Shell from paying taxes on its imported CCG and LCCG, the court said these could not be considered “BIR rulings” but merely “internal communications” or “office memoranda or communications stating the respective position and opinion of the concerned BIR officials...on the tax treatment of [Shell’s] CCG and LCCG importations.”
Despite the latest Court of Tax Appeals decision, one cannot consider this case resolved.
For sure, considering the amounts and issues involved, an aggrieved party like Pilipinas Shell is most likely to exhaust all judicial remedies available to it. The thing is, the Shell case is not the first -- nor will it be the last -- controversial issue involving big business and tax interpretations.
Perhaps the challenge to the incoming administration in 2016, and to the new Congress that will open, is to strike for more consistency in law and policy. Consistency in policies, coupled with strict application in laws, can go a long way in promoting greater business confidence. And it can help companies like Pilipinas Shell operate in a more transparent and accountable business environment.
Marvin A. Tort is a former managing editor of BusinessWorld, and a former chairman of the Philippines Press Council
matort@yahoo.com
source: Businessworld
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