The Aquino administration is eyeing to impose tax on already zero-tariff rate petroleum products in a move to put a stop smuggling of the “most smuggled” commodity in the country.
Finance Secretary Cesar Purisima said on Monday that the government will require all fuel importers to pay taxes notwithstanding the commodity’s zero-tariff rate regime.

”We will require fuel importers to pay tax. Oil as they say accounts for a major portion of smuggling,” he said during the Management Association of the Philippines 63rd Inaugural Meeting and Induction of 2012.

”Consumption of fuel in Subic itself is less than 10 percent of volume imported into Subic and the other zones,” Purisima added.

Last year, the oil port of Batangas was short by P16.61 billion against its P63.6 billion goal, while Subic Bay incurred a deficit of P1.32 billion as against its goal of P7.44 billion. Port of Limay in Bataan, on the other hand, exceeded its collection by P1.7 billion as against its goal of P30.97 billion. These ports mainly receive imported oils.

Purisima said that the Bureau of Internal Revenue will come out with a revenue regulation that will obligate petroleum traders in the country to pay the corresponding taxes.

He said that as part of the mechanism on the imposition of tax against oil products, all importers, including those that are supposedly tax exempt, will be subject to tax.

”The bulk of oil is consumed in the Philippines and its taxable anyway. Very small portion of oil is
consumed by legally exempt entities,” the Finance chief added.

Purisima was referring to importers of unfinished oil products that are processed for exportation.

At present, he said that the Department of Finance is in the process of reviewing whether there exists a legal impediment in imposing taxes on oil products.

In 2010 alone, the Bureau of Customs incurred some P6.54 billion in revenue lesions out of the country’s compliance with various free trade agreements to bring down the tariff rate of petroleum products to zero.

At present, oil products are levied value added tax (VAT) at a rate of 12 percent and excise taxes depending on which products were imported.

According to the Tax Code, regular gasoline will be charged an excise tax of P4.35 per liter; leaded premium gasoline, P5.35 per liter; unleaded premium, P4.35 per liter; aviation turbo jet fuel, P3.67 per liter; and kerosene used as aviation fuel, P3.67 per liter. Other products that are zero rated but will have to pay corresponding VAT include kerosene, diesel fuel, liquefied petroleum gas and bunker fuel.

Purisima, meanwhile, assured importers who are entitled to tax exemption that they will be reimbursed with cash through the Bureau of the Treasury.

”We have room in the budget for reimbursement… cash is better,” the Finance chief said.
The Finance chief also that the zero-tariff rate regime of nearly 2,000 products adversely affected the Bureau of Customs (BOC) revenue performance last year.

“We have to also recognize that year before, substantial amount of Tax Expenditure Fund that accounted for P40 billion of [Customs] collections the year before was because of over-importation of rice of the previous administration,” Purisima said.