MANILA, Philippines?The European Chamber of Commerce of the Philippines (ECCP) and the local business community have expressed concerns over the tax row between Pilipinas Shell Petroleum Corp. and the Bureau of Customs (BoC), stressing that the seeming instability in Philippine policies could have adverse economic implications.

In separate letters to the Bureau of Internal Revenue (BIR), ECCP and the Employers Confederation of the Philippines (Ecop) urged the agency to revisit the reversal of a previous ruling which exempted from excise taxes the importation of raw materials, particularly catalytic cracked gasoline (CCG) and light catalytic cracked gasoline (LCCG).

Chilling impact on firms

?This reversal has a chilling impact on the financial operations of all companies in the country as it imposes a monetary and criminal liability with retroactive effects on enterprises that faithfully complied with existing tax policies prevailing before the shift in BIR policies,? said Ecop president Edgardo G. Lacson.

Lacson noted that it would be a ?disruptive consequence on the companies? cash flow with such policy reversals and it could be a disincentive to investors as it bolsters misperceptions that our policies are unstable and whimsical.?

ECCP president Hubert d?Aboville said that a review was necessary ?to address these concerns and assure existing and potential investors on policy stability and fairness in a free market economy.?

With the reversal in the BIR ruling, the BoC demanded that Shell pay P43 billion in back taxes with interest and penalties based on an original claim of P7.3 billion in nonpayment of excise taxes on CCG and LCCG, d?Aboville said.

P43B worth of Shell imports

Shell and the BoC are in disagreement over the tax assessments on Shell?s raw material imports, resulting in the customs bureau threatening to seize P43 billion worth of the oil company?s imports.

Shell earlier warned that the seizure could lead to the closure of its Tabangao oil refinery and its more than 900 retail dealers stations, resulting in the loss of thousands of jobs.

Shell said that CCG and LCCG were intermediate products or raw materials that still had to go through a refinement process before they could be sold locally as unleaded premium gasoline. As raw materials, these products should not be liable to excise taxes.

Lacson agreed with Shell, noting that the reversed ruling ?would result in double taxation against manufacturers versus traders as manufacturers would be subjected to paying excise tax twice?first on importation and second on production of the same commodity.?