If the law-making process were a baseball game, methinks Senate Bill 2959, recently filed by Sen. Antonio “Sonny” Trillanes IV, would not even reach first base. The bill proposes to put a cap on the annual profits of oil companies by imposing a 50-percent “windfall tax” on their profits exceeding 12 percent but less than 20 percent of their paid-up capital per year, and 80-percent tax on profits beyond 20 percent of their paid-up capital per year.
I am somewhat confused! Does the good senator really mean a tax on windfall profits, or is he simply amending the existing law on corporate income tax, but only with respect to oil companies? In either case, I am afraid his proposition is self-defeating.
Etymologically, the word “windfall” may have been coined from something blown down by the wind, such as fruits from a tree, in turn indicating a good and easy harvest. In the business world, it has come to mean an unexpected or sudden gain or advantage, such as when goods previously purchased at a low unit cost suddenly become marketable at exceptionally high prices, But neither fruits blown down by the wind nor windfall business profits happen as a matter of course. For any given period, they come only rarely, and must thus be reckoned on a strictly case-by-case basis. Why then must the tax on so-called windfall profits be imposed on the “annual” (meaning total) profits of the oil companies?
On the other hand, if Trillanes’ real intention is to tax the annual profits of the oil companies differently from all other corporations, then his proposition defeats itself. I mean, the bill is clearly discriminatory, tantamount to class legislation and, hence, unconstitutional. Incidentally, many other local corporations, e.g., telecommunications and pharmaceutical companies, are known to earn comparatively higher returns on investments than the oil companies. Are such earnings, then, also considered “windfall” to invite a similar tax thereon? Alas, aren’t we penalizing business success?
This is not in defense of the oil companies. I am merely reacting rather dispassionately to the endless rise and fall in the pump prices of petroleum products locally and globally. I sincerely believe that, strictly and objectively speaking, the so-called windfall corporate profits are more of a myth than fact whenever and wherever the fundamental economic law of supply and demand essentially works. I think it still does in these parts, as recently echoed by the Presidential Spokesperson Edwin Lacierda when he said that we cannot control oil prices because they are driven by market forces.
Of course, the statement is not entirely accurate. Certainly, the government can do something, if only partially—and that is to maintain inflation to the minimum, which has been rising lately, because inflation weakens the value of the peso vis-à-vis the dollar, and the dollar-peso exchange rate is in turn one of the basic factors affecting the local pump prices of oil.
—RUDY L. CORONEL,
rudycoronel2004@yahoo.com