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Philippines Takes Action To Enforce Oil Import Taxes

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

03 April 2013

Finance Secretary Cesar Purisima has confirmed that the Philippines' Department of Finance (DOF), Bureau of Customs (BOC) and Bureau of Internal Revenue (BIR) are together undertaking a campaign to curb smuggling and ensure the collection of value added tax (VAT) and excise duty on oil imports.

According to the latest data from the Department of Energy, Philippines oil demand amounted to 106.9m barrels in 2011. However, current BOC data only records 67.6m barrels of oil imported in the same year, signifying a discrepancy of 39.3m barrels that is considered likely to be made up through smuggling.

Last year, the BIR issued Revenue Regulation (RR) 2-2012, which would have changed the tax administration on petroleum products to require the upfront payment of VAT and excise duty on imported oil. If the oil was to be used within special economic zones and qualifying for tax exemptions, tax-exempt parties would have been able to file for refunds.

Implementation of RR 2-2012 was, however, delayed for nearly a year, but, after a recent Court of Appeals decision, it has now been possible for the DOF to instruct the BOC to implement the RR and hold oil importations until the payment of VAT and excise tax.

In addition, the DOF will also soon implement a system of port accreditation for commodities at high risk of smuggling. Only particular ports will be accredited for importation of sensitive commodities, such as oil and steel, subject to standards and technical requirements. Accredited ports should submit to the DOF monthly reports that will be cross-checked with data from the Department of Energy and the Philippine Ports Authority, on a volume vessel basis.

"The port accreditation system will prevent 'port shopping,' and hinder unethical importers from evading tax collection," Purisima said. All importers of sensitive commodities will also be asked to submit annual rolling import plans indicating quantity, type, source and location of intended port arrival.

TAGS: compliance | Finance | Energy | tax | value added tax (VAT) | tax compliance | Philippines | oil and gas | excise duty | ministry of finance | tax authority | standards | trade

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