Fuel marking in PH eyed in 2018

0
637

A mandatory fuel marking system may be implemented in the Philippines by the Bureau of Customs (BOC) by early next year to curb smuggling and misdeclaration of petroleum products which cost the government almost P27 billion in annual revenue losses, said the Department of Finance (DOF).

The mandatory fuel marking system is part of Package One of the Comprehensive Tax Reform Program (CTRP) bill certified as urgent by President Rodrigo Duterte on May 29.

Finance Undersecretary Karl Kendrick Chua, during the recent 5th General Executive Council meeting of the Union of Local Authorities of the Philippines, said the fuel marking plan will be implemented by BOC, assisted by sister agency Bureau of Internal Revenue (BIR), beginning 2018.

Under the fuel marking system, a particular mark will be placed on oil, both locally produced and imported, to indicate that taxes for the product have been paid.

The procurement process for the system, which the BOC plans to start in the coming months, will be done through competitive bidding, Chua added. DOF, BOC’s mother agency, expects to award the contract by the third quarter of this year to give the successful bidder enough time to roll out the system by ‪January 1, 2018, Chua said.

Implementing a fuel marking system is provided under substitute bill House Bill No. 5636 approved last May 3 by the House ways and means committee covering the first package of the CTRP. The bill, sponsored by Quirino representative Dakila Carlo Qua on second reading, is now undergoing plenary deliberations at the House of Representatives.

“The project cost for a five-year implementation is expected to be fully recoverable as early as the first year of implementation, as the unit cost of fuel marking is low, as low as 9 centavos per liter based on past pilots,” Chua said.

The DOF estimates revenue losses (VAT and excise taxes) from smuggled or misdeclared fuel at P26.87 billion (about US$565.68 million) in 2016 alone.

However, the Asian Development Bank pegs the losses at a higher figure of P37.5 billion annually, while a study commissioned by the local oil industry estimates foregone revenues at P43.8 billion per year, Chua said.

Meanwhile, the Institute for Development and Econometric Analysis estimates that “smuggled gasoline accounts for an average of 23% of gasoline consumption from 2000 to 2006,” while “smuggled diesel accounts for an average of 6%.”

Revenue collections from petroleum products amounted to P52.56 billion last year.

Of this amount, BIR collected P13.22 billion in excise taxes and ‪P2.11 billion in VAT. BOC collected P10.92 billion in fuel excise taxes and P26.30 billion in VAT on fuel in 2016.

Industry gives approval

The fuel marking and monitoring system is backed by various groups, citing it as a way to prevent oil smuggling and complement efforts to improve the collection of fuel excise taxes.

In one of the hearings of the House ways and means committee chaired by Cua, officials of Dow Chemical, SICPA-Global Fluids International (SICPA-GFI), Authentix, and United Color Manufacturing Inc. agreed that a fuel marking system was an “economic, commercial, health, safety and environmental” concern that should be institutionalized to complement the government’s proposal to adjust fuel excise tax rates as part of the CTRP.

Roberto Batongbakal, who represents Dow Chemical, told the ways and means panel that on top of helping curb smuggling, fuel marking will also ensure that oil products sold in the market are of high quality, safe, and highly regulated, and comply with the country’s environmental laws.

Gadi Gonen, managing director of Switzerland-based SICPA-GFI, said fuel marking is a must to thwart oil smuggling, which terrorist and organized crime groups resort to in order to raise funds.

Ramon Lacdan, local manager of Pennsylvania-based United Color, and Joel Fischl, managing director for Asia of Texas-based Authentix, both concurred with SICPA and Dow Chemical that fuel marking will help increase tax revenues from oil products while protecting consumers as well.

Image courtesy of [name of the image creator] at FreeDigitalPhotos.net