The government continued to incur roughly P44 billion in annual revenue loss from unabated smuggling activities in the deregulated downstream oil industry, according to the Philippine Institute of Petroleum (PIP), an organization of the country’s major oil companies.
In a presentation to the House Committee on Energy, the group indicated that there are remaining concerns in the country’s fuel marking program and there are also predicaments hobbling proper tax collections on fuel products being retailed at the pumps.
Given these unresolved drawbacks in the industry, it was noted that the State continues to be at the losing end when it comes to target of beefing up revenues from the oil sector.
The PIP stated that with continued illegal activities of some players, primarily smuggling, the government is being deprived of “the needed social services, infrastructure buildup and such also contributes to the uneven playing field.”
Additionally, the group conveyed that the fuel marker-entity, SGS Philippines, that had been tapped by the government as its implementing partner in the program, must be able to address the "homogeneity concern" or what had been deemed as "technical lapses" in the marking of the imported fuels being retailed at the gas pumps.
“The PIP has always been a partner of the government in its fight to stop fuel smuggling; and we reiterate and we are hoping that the government’s technical service partner can resolve the homogeneity issues that limit efforts to do field testing and enforcement in the fuel marking program that we have,” it stressed.
The group similarly recommended the need to “plug loopholes in the fuel tax collection through simpler process and tighter VAT (value added tax) payment monitoring, such as the issuance of receipt for all industry players.”
The PIP emphasized that this can be intensified through campaign for “consumers to ask receipts from retail stations; and to strictly mandate the issuance of official receipts by the retail stations.”
Fuel commodities being sold to consumers are being levied with 12-percent VAT, on top of the actual product price and the additional excise taxes being enforced under the Tax Reform for Acceleration and Inclusion (TRAIN) Act.
The organization of the oil firms further explained that “this will enable the government to compare VAT-in and VAT-out, and consequently, slash out illegal traders and increase tax revenue collections.”
Smuggling as well as deficient tax collections had long been thrown as issues against some unscrupulous players in the deregulated oil industry, but despite more than 20 years of the market’s liberalization, these persisted as the biggest hurdles into attaining level playing field in the industry.