MANILA, Philippines—Malacañang has admitted that oil smuggling continues in the country but has emphasized that government is trying to lick it through increased monitoring of economic zones and large ports in Limay, Bataan, Batangas City, Manila International Container Port and the Ninoy Aquino International Airport (NAIA).
These entry points for imported crude and refined oil have been under scrutiny by the Bureau of Internal Revenue (BIR), Department of Finance (DOF) and the Bureau of Customs (BOC).
At a briefing in the Palace, presidential spokesperson Edwin Lacierda disclosed that these agencies “have aggressively stepped up the campaign to curb oil smuggling, and to make sure that we bring smugglers to justice.”
“Proactively, we’ve identified some smugglers and, in fact, we’ve already filed certain number of cases. The DOF will be issuing (shortly) the number of cases that we have filed against the smugglers,” he said.
A party-list group, however, slammed Ramon Ang, Petron Corp. chairman and chief executive officer, for claiming that from 2007 to 2011 smuggled oil products accounted for at least a third of the total volume sold in the market.
“Obviously, Ang is pointing to oil smuggling as the so-called cause of government losses to cover up their enormous profiteering spree over the self-imposed and unrestrained oil price hikes dictated by the Big 3,” Anakpawis party-list chairman Randall Echanis said when asked for comment.
Echanis noted the temerity of Ang to apparently accuse the other oil importers, mostly the small fry in the downstream oil industry, of smuggling when the Big 3 oil companies—Petron, Pilipinas Shell and Caltex Philippines— were refusing to open up its books for public scrutiny.
“The continuing oil smuggling in the country affirms the shameful truth that oil deregulation only led to the proliferation of both ‘legal and illegal, big time and small time’ smugglers,” said Echanis.
Echanis noted that Ang complained only after Petron’s bottomline or profit margins went down.
He called on Malacañang to order an audit of the taxes paid by the Big 3 and other big oil importers to assess whether they had evaded payment of correct taxes.
But the rampant oil smuggling—which had its heyday during the past administration—could have been curbed under the Aquino presidency were it not for a temporary restraining order (TRO) that had been issued against BIR Regulation No. 2-2012.
“There was, however, BIR regulation No. 2-2012 which would have changed the tax administration on petroleum products,” said Lacierda.
“What the Revenue Regulation 2-2012 require would be an upfront payment of tax and duties on imported oil. If the oil was to be used within special economic zones and qualifying for tax exemptions, those tax exempt parties would have been able to file for refunds under this Revenue Regulation,” he said.
Lacierda, however, lamented that the implementation of the revenue regulation was restrained by an Angeles City court after Pampanga Representative Carmelo Lazatin sought it.
After the TRO, an injunction was issued by the judge there,” he said, adding:
“The Court of Appeals (CA) has reversed the decision last February 14, 2013. We’ll just check if it’s already (decided with finality). Following that CA decision, the Bureau of Customs has begun full implementation of RR 2-2012.”
He said the revenue regulation 2 “would have made sure that the ecozone locators would be able to get tax exemptions. Some of them would have qualified for tax exemptions and it would’ve—they would have been able to avail of refunds. Unfortunately, this was TRO-ed by the courts, and it was only last February when … the issuance of that injunction was declared to be in error.”
Based on official data, the Philippines consumed a total of 110 million barrels of oil in 2012, of which 50 percent were imported as finished products.
The rest were refined in the country by Petron and Pilipinas Shell. Other companies import finished petroleum products like gasoline and diesel mostly from Singapore.
Besides the official fuel imports, an estimated 36 million barrels were smuggled into the country, Ang claimed.
Petron, which accounts for an industry-leading 34.9-percent share of the domestic market in the first half of 2012, saw its profit plunge 73 percent to P2.3 billion in 2012 from P8.5 billion in 2011.
The huge drop in Petron’s profit came despite a 55-percent jump in revenue to P424.8 billion in 2012.
The company attributed the fall in margins to volatility in crude and product prices in 2012. Its expanded Bataan refinery, which cost $2 billion, is expected to start operations in 2014.
Asked if the current efforts to curb oil smuggling were sufficient, Lacierda said:
“Well, as I mentioned, apart from this Revenue Regulation 2-2012, we have stepped up on major physical visitation on those ports—ports which are considered as the ports where the oil imports are being done.”
“(What) some of these smugglers would tend to do is to do port shopping. We’re making sure that all these ports are visited, and that efforts are made to curb smuggling,” said Lacierda.
Among the measures in place is a tax regulation that ensures ecozone locators get the tax exemption ostensibly to make smuggling unpalatable to them.
The DOF, BOC and BIR have already visited some of the seven major district ports, or “major oil importing ports such as the Port of Limay…to gather data,” Lacierda said.
“So the first wave of visits were undertaken from February 5 to March 15; the second wave of visits will begin by this month (will cover) the Manila International Container Port, the Port of Manila, Port of Naia, and the Port of Batangas, and other major oil importers,” he said.
“So we’re doing a number of efforts to make sure that we curb smuggling. So we’ve stepped up on efforts and ensure that we minimize, if not totally, curb oil smuggling,” he added.