Various groups have backed a proposal by Rep. Dakila Carlo Cua and the Department of Finance (DOF) to adopt a fuel marking and monitoring system as a way to prevent oil smuggling and complement efforts at improving the collection of fuel excise taxes.
In a recent hearing of the House ways and means committee chaired by Cua, officials of Dow Chemical, SICPA-Global Fluids International (SICPA-GFI), Authentix and United Color Manufacturing Inc. were one in saying that a fuel marking system is an “economic, commercial, health, safety and environmental” concern that should be institutionalized by the government to complement its proposal to adjust fuel excise tax rates as part of its Comprehensive Tax Reform Program (CTRP).
Fuel marking, which securely and covertly authenticates petroleum products, has been proposed by Cua undee House Bill No. 4774 and endorsed by the DOF, to further improve the collection efforts of the Bureaus of Internal Revenue and of Customs (BOC) and foil oil smuggling, especially when the government starts implementing its CTRP that includes staggered increases in fuel excise taxes.
Roberto Batongbakal, who represents Dow Chemical, told the ways and means panel that on top of helping curb smuggling, fuel marking will also ensure that oil products sold in the market are of high quality, safe, highly regulated and complies with the country’s environmental laws.
“We recommend that the government develop a comprehensive fuel marking strategy for imported and locally produced fuel throughout the Philippines. We need to leverage best practices from governments that have successfully implemented fuel markings in their countries,” Batongbakal said.
Batongbakal cited Philippine trade data showing a total of $7.2 billion of crude and fuel oil imports as of 2015, import volumes growing 7 percent annually for the past five years.
Of these imports, 60 percent is crude oil and 40 percent is non-crude or finished products, he said.
Oil industry data also show that the government is losing $20 billion to $30 billion in revenues annually from oil smuggling.
“The government is not the only one losing revenues, but also legitimate fuel manufacturers and distributors,” he noted.
Gadi Gonen, the managing director of the Switzerland-based SICPA-GFI, said fuel marking is a must in thwarting oil smuggling, which terrorist and organized crime groups resort to in order to raise funds.
He said a fuel marking system that his company had implemented in Tanzania raised some $142 million in additional revenues for the government of that African country.
Ramon Lacdan, the local manager of the Pennsylvania-based United Color, and Joel Fischl, managing director for Asia of the Texas-based Authentix, both agreed with the SICPA and Dow Chemical representatives that fuel marking will help the government increase tax revenues from oil products and protect consumers as well.
“Vehicles are very sophisticated today, and if you put adulterated fuel or smuggled fuel into an automobile, it does bad things to the engines. So (fuel marking provides) consumer protection, public protection and revenue protection,” Fischl said.
Earlier, former Finance Secretary Margarito Teves along with sectoral leaders expressed to the Congress their support for a provision under House Bill No. 4774 that seeks to adjust the diesel excise tax and index it to inflation, as part of a government plan to raise enough funds for a massive public investment program to attack poverty and sustain the country’s streak as one of Asia’s fastest-growing economies.
Together with Teves, officials of the Action for Economic Reforms (AER), and the Tax Management Association of the Philippines (TMAP) similarly issued their respective groups’ statements of support for HB 4774 filed by Cua.
The nonprofit research group International Tax and Investment Center (ITIC), based in Washington DC, also backed the fuel excise tax hike.
HB 4774 covers the first package of the CTRP that the DOF has endorsed for congressional approval as an integral component of the Duterte administration’s unmatched spending on infrastructure, human capital and social protection over the next six years.
Cua’s bill is anchored on sizable cuts in personal income tax (PIT) rates, as part of the CTRP plan to make the country’s tax system simpler, fairer and more efficient, particularly for poor households along with low- and middle-income taxpayers.
To make up for the expected losses from the PIT cuts, Cua’s bill provides for revenue-offsetting measures, including a staggered increase in the diesel excise tax from zero to P6 per liter over a three-year period from the second half of 2017 to 2019.
By 2020, the diesel excise tax would be adjusted by 4 percent to account for inflation.