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Customs preparing new fuel-marking scheme to fight smuggling The scheme is estimated to net an additional P13.6 billion in government revenue from curbing smuggling, particularly in Bataan ports.
Published 9:03 PM, July 26, 2015
Updated 9:03 PM, July 26, 2015
MARKING. Customs Chief Alberto Lina wants to put fuel-marking on all tax-paid oil products. File Photo/Rappler.
MANILA, Philippines – In response to possible oil smuggling in the country, the government is readying the terms of reference for the implementation of a new fuel-marking scheme.
Customs Commissioner Alberto Lina said the terms of reference will hopefully be ready by next month and that he hopes to implement the fuel-marking system "as soon as possible."
Last May, the Bureau of Customs (BOC) said that is intensifying its drive to get rid of oil smuggling in Bataan ports.
The agency said tha it t is particularly focused on stopping the illegal act of siphoning of crude from tankers, a practice known as "patulo."
In one of the operations at the Philippine Ports Authority (PPA) port in Orion, Bataan, operatives were able to intercept a tanker truck filled with approximately 20,000 liters of stolen diesel fuel worth at least P800,000 ($17,557) inside the PPA compound, as well as a wooden hulled vessel with an empty compartment smelling of fuel complete with pumps and a hose.
New fuel marking scheme
Lina said that based on consumption, the estimated cost of the proposed fuel markings is $25 million (P1.1 billion).
He added, however, that the government is estimated to generate an additional $300 million (P13.6 billion), with the implementation of the said scheme.
A fuel-marking was already implemented in the past, but the contract for the said scheme has already ended, he said.
Swiss inspection services provider Societe Generale de Surveillance was tapped for the previous fuel-marking system.
The Customs chief also said that he wants to make some changes to the new system compared to the previous one.
In the previous system, fuel markings were placed on tax-exempt products, while no markings were made on tax-paid fuel products, Lina explained.
"It shouldn't be that way because it means that all products without fuel-markings are tax-paid. We were discussing just a few weeks ago that the fuel-markings will be placed on tax-paid products instead. If the fuel products have no markings, it means that those are smuggled," Lina said. – Rappler.com
Philippine Daily Inquirer 12:28 AM October 22nd, 2015
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President Aquino is reluctant to support lower income taxes because of the estimated P30 billion in losses if the rates were lowered. And I agree with him. It’s an easy and extremely popular step to cut taxes, but the government has to also meet its obligations. Still there are two reasons why taxes need to be cut.
First, the taxes we pay today were decided upon in 1997, with a set of tiers. Congress, in its infinite wisdom, set these with no allowance for inflation; 18 years later, prices have risen 138 percent. So wages have also risen to minimize the erosion in the standards of living. A worker earning P40,000 per month has P10,000 (25 percent) ripped off him by the government. He’s left with P30,000 to support his family of five (the average). Eighteen years ago, that P40,000 was equivalent to a worker earning P17,000 and taxed only P1,200 (7 percent!) So today he should be paying only P2,800, not P10,000.
Second, we have the highest tax rates among our competitor-neighbors, which leads to lost investment to grow the economy faster and create jobs. There are some possible solutions to this problem that I’ll discuss in the coming weeks as these are something the 16th Congress can do before it collapses.
It is estimated that between 20 percent and 30 percent of all fuel sold in the Philippines is smuggled, which means the government is losing as much as P40 billion annually due to the sale of illegally imported gas and diesel where the excise and VAT taxes haven’t been paid. Here in just one item is the money Mr. Aquino needs to overcome his concern; all he needs to do is collect it. And that is as easily done as said.
But it does raise a key point: Tax reduction should be balanced by concurrent revenue generation. The two must go hand in hand. I’ve been involved in a project where modern technology has developed a fuel marker that uses microscopic amounts (parts per billion) of a chemical that can’t be faked or played with, but can be accurately measured with a field-portable, high-tech device that says whether the fuel is legitimate or not. All you need to do is go to a gas station or oil depot, buy a small sample, put it in the proprietary device, and bingo! It says ok or not ok. If it is not ok, the sample goes to a sophisticated lab that forensically confirms the finding so that the testing results are defensible in court. Customs can then seize the illegal fuel from the offending gas station, and can also levy a fine—or, for a repeat offender, close the station down.
The Asian Development Bank published an article last month encouraging countries to use fuel marking as it is a successful way to raise revenues and ensure the quality of fuel.
To make this work, the President needs to allot a fund for Customs Commissioner Bert Lina to form a task force that would go after the cheats. The cost compared to the revenues generated will be tiny. And with a dedicated task force, it can work; otherwise, it will be lost in bureaucratic inertia.
I’m always suspicious when someone offers me something that seems too cheap to believe. There must be a catch, or there must be something wrong. If a gas station offers me diesel at P24.20 per liter when Shell is charging P28.05/liter, I have to wonder: How can a small gas station buy small quantities of diesel cheaper than Shell, which buys in enormous volumes and, hence, gets the best possible price?
Immediately, someone is going to say it’s because Shell is gouging the public, making huge profits from our gullibility. Well, in 2012 Shell made a 2.5-percent net profit on its sales. Jollibee, which, we’d all agree, charges a very fair price for its hamburgers, made 13 percent. Where’s the gouging here?
So it’s fairly obvious that a little gas station isn’t paying taxes. And what kind of fuel is it selling? Because that, too, comes into question. Are you getting quality fuel or one that, over time, will ruin your engine? You may save a little today, but you’ll pay a lot tomorrow. Adulterated or questionable fuel is a risk to your engine.
The government is considering marking all fuels. It should do so to protect our vehicles and cover Congress lowering the taxes imposed on us. Not only will the government get more revenues, but legitimate oil companies will also benefit through increased sales. Such a program can be put in place by paying approximately 7-9 centavos more per liter, but the lower taxes we pay will give us more than enough to pay for that. Other countries have found that where fuel marking has been introduced, the government and legitimate players see revenues rise quite dramatically.
In Serbia in 2014, the government was losing an estimated $46 million or as high as $115 million annually due to smuggling. A year after fuel marking was introduced, the government saw fuel tax revenue increases of 150 million euros, and legitimate oil companies sold 18 percent more diesel and 14 percent more gas. It was the same story in other countries, proving that marking fuel works.
Lower taxes are fairer. Here’s a legacy that the President can leave, a show of compassion that will resonate well with the (voting) public. But it should be taken a step further forward (see my column “A tax revolution,” 4/16/15). Take anyone earning less than a certain amount off the tax rolls altogether. It simplifies the Bureau of Internal Revenue’s task for little loss and improves the lot of the hard-working poor significantly. But it will need more than fuel marking revenues to pay for that. That comes next week.
Give us a break: Find a way to lower taxes.
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