Taxation is not causing oil refiners to go out of business, the Duterte administration’s chief economic managers maintained.
Finance Secretary Carlos G. Dominguez III said the economics of oil refinery has drastically changed, forcing petroleum companies to shutdown their facilities in various parts of the world.
“Another refinery closing,” Dominguez told reporters a mobile phone message, referring to an international report that Shell Corp. was set to shutdown its refineries in Louisiana, US.
The finance chief said the Anglo-Dutch multinational oil and gas company’s decision was driven by the drastically changing economics in the oil refining business.
“It’s not about the fiscal environment but rather ability to compete with larger integrated end-to-end refineries with petrochemical complexes,” Dominguez noted.
To recall, Dominguez said he was not amenable to proposed tweaks in the country’s tax laws applied to the supply chain of the downstream oil sector in the Philippines.
“We don’t need to change our tax laws on this,” Dominguez said when asked for comment on Petron Corp. Chief Executive Officer Ramon S. Ang’s concerns over an alleged “inequitable tax regime” between oil refiners and importers in the country.
Ang explained that Petron, the country’s lone oil refiner, is currently being taxed double—one on the imported crude oil upon its arrival and another on the finished product.
On the other hand, Ang noted that oil importers are taxed once for selling petroleum products.
For this reason, Ang warned Petron will shut down its 180,000-barrel Bataan refinery “very soon” due to a “difficult” environment brought about by the uneven playing field.
But Dominguez said that Petron’s predicament is a supply chain issue rather than a tax issue.
“We note that in the refinery business, there may market and timing issues-such as importing crude at a high price, then after refining the world crude prices might be lower, thus, refining margins could be lower,” Dominguez said.
“On the other hand, an importer, who imports finished products can sell these products right away, making him less vulnerable to oil price movements,” he added.
Last August, Pilipinas Shell permanently shut its refinery in Tabangao, Batangas.
“We don’t need to change our tax laws on this. It’s happening worldwide, refinery margins are getting squeezed. Big oil companies have been shutting down their refineries in various parts of the world,” Dominguez said.