Customs mulls revival of fuel marking scheme

MANILA, Philippines – A monitoring program for oil entering the country first floated eight years ago is staging a comeback to help fight oil smuggling.

Customs commissioner Nicanor Faeldon said yesterday consultations are ongoing for a fuel marking scheme that would track local oil produce and imports “likely by next year.”

“We would likely have it by next year. We will now be able to track all fuel that come into the country,” Faeldon told reporters on the sidelines of a Senate hearing.

“We are still doing some consultations. But it will cost six centavos per liter which we believe is very cheap,” he said.

The program was first floated in 2008, when Swiss firm Societe Generale de Surveillance was tapped to provide the technology to track oil entering some economic zones.

It was again explored in 2015 when terms of reference for bidding was published.

It was not clear why the program failed to make headway in both instances. According to Bureau of Customs data, the country loses an average of P10 billion in revenues from oil smuggling every year.

The fuel marking system will work like that of the excise tax stamps on tobacco and liquor products mandated by law. It will put a particular mark on oil, both locally produced and imported, whose taxes have been paid.

Teddy Reyes, executive director of Philippine Institute of Petroleum (PIP), opposes the plan. “The government lacks the logistics to track fuel. It is not effective,” Reyes said during the same hearing.

According to latest available data, Customs collected P34.02 billion from oil import taxes in 2014, up 1.4 percent year-on-year.

This as global oil prices have remained subdued over the past two years, lowering the valuation of shipments where levies were based.

Once inside the country, excise taxes from oil products are likewise collected based on consumption. The Bureau of Internal Revenue raised P6.18 billion from this as of June.

PIP opposes the fuel marking system as it coincided with the Department of Finance’s plan to increase excise charges on oil under the first package of its tax reform program submitted to Congress for approval.

“Higher specific excise tax will incentivize fuel smugglers since the VAT (value-added tax) audit trail mechanism is not available in specific tax,” Reyes said, quoting PIP statement.

“Current oil regime of low petroleum prices is not assured over the long term as the volatility, whether economic or political affect global prices,” he added.

But Finance Undersecretary Antonette Tionko disagreed. “Based on our medium-term program, oil prices will remain subdued,” she told reporters.