After nearly five years of implementation, has the government's fuel marking program successfully halted or significantly reduced oil smuggling in the Philippines?
Rather than providing a direct answer, the Bureau of Customs (BOC) has chosen to rely on official data to illustrate the program's effectiveness.
But before delving into this, let us first look at the background of the fuel marking program, which was initiated during the Duterte administration after being in the works for a considerable period before it was finally launched in September 2019.
In 2016, the government estimated losses of around P27 billion due to widespread oil smuggling and misdeclaration.
The official government figure, however, was considered conservative compared to assessments by the Asian Development Bank and industry players, which estimated losses at P37.5 billion and P44 billion, respectively.
These losses were significant given that petroleum taxes typically accounted for up to two-fifths of the BOC’s revenue collection.
Under the fuel marking program, the BOC and the Bureau of Internal Revenue (BIR) have been given deputization and police authority for conducting on-site testing of oil products, allowing them to seize adulterated, diluted, or unmarked petroleum and to apprehend unscrupulous traders.
Since 2019, a total of 75 billion liters of fuel have been marked by the government’s two main tax agencies, leading to the collection of P856.13 billion in excise taxes.
The BOC contributed the bulk of the revenues, amounting to P826.32 billion, while the BIR accounted for the remaining P29.81 billion.
But, what about the trend in tax compliance among oil companies following the implementation of fuel markings?
Data from the BOC now showed that the volume of oil imports nearly tripled, and taxes and duties collected from fuel products surged by almost six times since the introduction of fuel marking.
In comparison, five years prior to the program's launch, BOC data indicated that the volume had even decreased by 10.4 percent, while taxes and duties from oil had only risen by 3.7 percent between 2014 and 2018.
The Department of Finance (DOF), tasked with supervising the BIR and BOC, has been grappling with the persistent issue of fuel smuggling.
A study by the United Nations Conference on Trade and Development had revealed that there was a discrepancy between the reported import value by the BOC and the actual fuel exports to the Philippines from 2010 to 2018.
However, since the implementation of fuel marking in 2019, the gap has shown signs of narrowing.
In 2019, the volume of oil imports posted a significant surge to 11.17 billion liters from 6.31 billion liters, resulting in revenues of P111.2 billion, a stark increase compared to the previous year's collection of P39.8 billion.
Despite the challenges posed by the Covid-19 pandemic, the BOC reported a 40 percent increase in fuel volume to 15.7 billion liters in 2020. However, lower taxes were paid due to the decline in global crude prices that year, leading to revenue generation of P109.3 billion.
Starting in 2021, the country registered sustained growth in its oil import volume as the global economy began to recover from the pandemic, while the BOC and the BIR are actively enforcing their fuel markings.
In 2022, duties and taxes collected amounted to P240.7 billion, a 45 percent increase compared to P165.96 billion the previous year. The total volume also rose by eight percent to 18.39 billion liters from 17.03 billion liters.
Last year, the BOC reported a three percent rise in oil volume to 18.97 billion liters, equivalent to P234.18 billion in duties and taxes.
Customs Deputy Commissioner Teddy Sandy Raval said that the fuel marking program is currently being implemented simultaneously nationwide.
The government has engaged SGS Philippines Inc. and Switzerland-based SICPA SA to manufacture the marker. Under their contract, the private contractors are tasked with marking 119 billion liters.
Raval said that SGS and SICPA have successfully marked 75 billion liters so far, with 44 billion liters remaining to fulfill the contract.
“After that, it is up to the government if it will contunue the program,” he said.