Filipino Lawmakers Mull Windfall Tax On Oil Company Profits

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

31 October 2008

The Filipino Congress is considering whether to introduce a tax on the windfall profits made by the country's oil companies.

House speaker Prospero Nograles made the announcement this week amid growing anger that the country's major oil firms are making a colossal profit on the back of increasingly unaffordable petrol prices.

Crude oil prices have plummeted over the past few months, with the price of a barrel of crude dropping in value by over 50% in October alone. However, despite this large drop, the price of a litre of petrol at the pump has been unchanged, leading to accusations that the oil companies are profiteering at the expense of the consumer.

Mr Nograles is now proposing a levy on the profits of such oil companies so as to force them to drop their pump prices in order to reflect the decline in the price of a barrel of oil.

Earlier this year, Filipino consumers called for the government to scrap the 12% rate of VAT levied on oil to try and ease the burden caused by rising pump prices. The country's Finance Undersecretary, Gil Beltran, also proposed that if a specific tax is imposed on oil, such a levy should be indexed to inflation, in order to maximize the loss of government revenue.

However, President of the Philippines, Gloria Macapagal-Arroyo stated that the 12% value-added tax (VAT) levied on oil will remain in place for the forseeable future.

In addition to the news of a possible tax on revenue, Mr Nograles also warned oil companies that, should they be found to be deliberately profiting from a pricing system designed to benefit them at the expense of the consumer, legal action will be taken.

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