The Bureau of Customs (BOC) defines “fuel marking” as the addition or administration of an official fuel marker to petroleum products that are refined, manufactured, or imported into the Philippines—such as but not limited to unleaded and premium gasoline, kerosene, and diesel—after the taxes and duties thereon have been paid. Since petroleum products are imported, they are subject to customs duty and excise tax. These petroleum products are likewise subject to the value-added tax. They are also included in the importers’ inventory for purposes of income taxation.
Fuel marking is a tool used by the government to eliminate the smuggling of petroleum products and to increase the revenue collection of the BOC and the Bureau of Internal Revenue (BIR) from taxable imported and locally refined petroleum products. Any “unmarked” petroleum product gives rise to a presumption that it was smuggled into the country and the requisite duty and excise tax have not been paid. Such “unmarked” petroleum product is susceptible to customs duty and internal revenue tax assessment.
Republic Act No. 10963, known as Tax Reform for Acceleration and Inclusion Law (TRAIN Law), mandates the implementation of a fuel marking program (FMP) within five years from the law’s effectivity, or until 2023. From September 2019 up to mid-June this year, the total duties and taxes collected from marked fuel products amounted to P453.43 billion. The success of FMP impelled the BOC to seek its implementation beyond 2023.
Last July, the BIR issued a memorandum to the field inspection unit (FIU) of the large taxpayers service terminating the involvement of its personnel in the FMP’s field-testing activity mandated by the TRAIN Law. The BIR memorandum effectively overrides Department of Finance Joint Circular No. 001.2021, which vests upon the FIU the authority to conduct jointly with BOC personnel the random field and confirmatory testing on fuel products. Talk about a bureau countermanding a joint issuance of a department. Only in the Philippines.
According to the Asian Development Bank, a robust fuel marking program provides the government with a comprehensive approach that analyzes each stage of the supply chain; beginning with the country’s refineries or fuel depots, and extending to the eventual sale of fuel products at the retail level. The ultimate effectiveness of a fuel marking program is realized when it mitigates fuel fraud, resulting in the return of stolen revenues to state coffers.
The undue suspension of the random joint field inspection renders ineffective the FMP as there is no way for the government to determine if retailed petroleum products have been duly “marked.” The suspension also creates a business climate conducive to oil smuggling and unnecessary hemorrhage of revenues from customs duties and excise taxes on “unmarked” petroleum products. It is basically an invitation to smuggle fuel products into the country; perhaps worse than the recent sugar importation controversy. The suspension of the joint field inspection is a revenue faux pas with costly unintended consequences to the state. Are there pockets to be lined by the marked fuel inspection suspension stratagem? Is an economic saboteur derailing government’s efforts to raise revenues?
Frank E. Lobrigo, franklob.sbc@gmail.com