Fuel suppliers awaiting clarification after paying excise on current stocks

By Sheldeen Joy Talavera, Reporter

FUEL SUPPLIERS said they have already paid excise tax on current inventory and are awaiting clarity on how the impending excise tax suspension or reduction will be carried out.

Leo P. Bellas, president of Jetti Petroleum, Inc., said excise taxes have already been paid on their physical in-tank inventory, leading him to believe that any such action on the tax may not take place immediately.

“Oil companies will be waiting for the release of the implementing rules and regulations governing the excise tax suspension for more clarity on this concern,” he told BusinessWorld.

The government collects excise tax and value-added tax (VAT) on fuel. Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) law, sets fixed per-liter excise tax rates of P8 for gasoline, P6 for diesel, and P4 for kerosene.

On top of this, a 12% VAT is also applied to the total selling price, including the excise tax.

Shell Pilipinas Corp. (SPC), the second-largest downstream company, also called for clarity on any tax suspension or reduction.

“We are also  prepared to make sure that it is implemented in a clear and in a coordinated manner,” SPC President and Chief Executive Officer Lorelie Quiambao Osial told a Senate hearing on Thursday.

The rush to offer price relief at the pump has raised the possibility of similar action on VAT as well.

“I would  also review the value-added tax because I think that would have more immediate impact as well as targeted,” Seaoil Philippines, Inc. Chief Executive Officer Mark Yu told Money Talks with Cathy Yang on Thursday.

The impending move on the excise tax received expressions of support from some suppliers.

“We fully support the suspension of the fuel excise tax and will  comply with the measure,” Bridgette Carmel C. Lim, senior vice-president and chief operating officer of Top Line Business Development Corp., a Cebu-based fuel trader, told BusinessWorld.

On Wednesday, President Ferdinand R. Marcos, Jr. signed a measure giving him the authority  to suspend or reduce excise tax on petroleum products. One of the trigger events is 30 days of the Dubai crude benchmark breaching $80 per barrel.

Any suspension or reduction of fuel excise taxes can run between three months and one year. Taxes automatically return to their original rates the week after the Dubai crude 30-day average drops below $80 per barrel.

Since the outbreak of fighting in the Persian Gulf, pump prices have more than doubled, to beyond P100 per liter.

If the fuel excise tax is suspended, oil firms are estimating a reduction of around P10 per liter for gasoline and P6 per liter for diesel.

“For oil companies, excise tax is largely a pass-through cost, so the primary benefit of the measure is on consumers through lower pump prices,” Ms. Lim said.

She said longer-term price stability will still depend on global oil market conditions and supply dynamics.