Home » Customs & Trade, Ports/Terminals » Fuel marking on petrol products to be implemented next year, says DOF

The Department of Finance (DOF) expects the fuel marking and monitoring system mandated under the proposed tax reform law to be in place by the second half of 2018 as part of sustained government efforts to curb smuggling in the oil sector.

Finance Secretary Carlos Dominguez III, in a statement, said the government will have to decide the kind of fuel marking service to implement, given the variety of offers received from private providers and the kind of training that personnel from the Bureau of Customs (BOC) and Bureau of Internal Revenue (BIR) will have to undergo to familiarize themselves with the new ​system.

Dominguez likewise said he has agreed that the service and supply of equipment for the fuel marking system will have to be approved by the Investment Coordination Committee (ICC), as suggested by the Department of Budget and Management (DBM).

“I said let’s just put it through ICC. We will have a meeting on the 6th (of December) anyway, so whether or not it is needed we will just put it before them. Anyway there is no controversy over that,” Dominguez said​.

According to DOF Undersecretary Antonette Tionko, the Terms of Reference (TOR) for the system is almost complete and will be available by the end of this month, with the procurement process expected to start by December.

“The procurement process (is expected to be) finished by the first quarter (of 2018), and we want to implement already by the second half,” Tionko said.

She added that the procurement and implementation schedule for the system remains on target.

Tionko said the government is carefully crafting the TOR to ensure the service to be acquired will be the most effective in curbing oil smuggling, given the various technologies offered by fuel marking system providers.

“That is why the TOR is very important,” she said.

Dominguez said the government is “basically outsourcing” the service because​ it lacks the technical expertise to put in place fuel markers on petroleum products.

The mandatory implementation of a fuel marking and monitoring system is among the tax administration reforms tucked in​ the proposed Tax Reform for Acceleration and Inclusion Act (TRAIN) now pending in Congress.

House Bill No. 5636, the TRAIN version approved by the House of Representatives, specifies a fuel marking provision in the measure. A similar provision is also written in the Senate version of the TRAIN bill.

DOF has estimated revenue losses (value-added tax and excise taxes) from smuggled or misdeclared fuel at P26.87 billion (about US$565.68 million) in 2016 alone.

The Asian Development Bank has pegged the losses at a higher figure of P37.5 billion annually, while a study commissioned by the local oil industry places them at an even higher P43.8 billion per year.

The Institute for Development and Econometric Analysis estimated 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%.”

 Image courtesy of Naypong at FreeDigitalPhotos.net

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