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ECCP Urges Review Of Shell's Tax Case In Philippines

by Mary Swire, Tax-News.com, Hong Kong

26 January 2010

The European Chamber of Commerce of the Philippines (ECCP) has written a letter to the Philippines Bureau of Internal Revenue (BIR) expressing its unease over the continuing tax dispute involving Pilipinas Shell Petroleum Corporation (PSPC).

In December last year, PSPC petitioned the Philippines’ Court of Tax Appeals to prevent the Bureau of Customs from enforcing a PHP7.3bn (USD157m) excise tax assessment on its imports from 2004 of catalytic cracked gasoline (CCG). With interest and penalties, the total tax arrears that the Bureau of Customs is now said to be claiming from PSPC has been put at PHP43bn.

In its submission to the court, PSPC questioned the jurisdiction of the Bureau of Customs over the imposition of the tax, given that, it was said, the BIR has responsibility for interpreting the provisions of the Philippine revenue regulations. It also said that the BIR had made a prior ruling that the CCG imports were not subject to excise tax, as they are duty-free raw materials subsequently used in the production of unleaded premium petrol in PSPC’s refinery.

At the hearing before the Court of Tax Appeals, PSPC was able to obtain a temporary restraining order. However, that order runs out on February 9 and, if PSPC has not settled by then, the Bureau of Customs has said that it will seize all PSPC's future CCG imports, which could stop PSPC’s oil refining.

The letter from the ECCP points out the harmful precedent that could be set by such unpredictable changes to tax rulings, and the future consequences on investment into the country if rulings by one government body may be reversed by another.

It says that it would further discourage manufacturing investment if the Bureau of Customs were to succeed, as taxes on PSPC’s CCG imports, subsequently followed by taxes on the unleaded petrol sold on its forecourts, would amount to a precedent of double taxation on productive activities in the Philippines.

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