‘BIR is ready to back up BOC on case vs Shell’

By VG Cabuag, Business Mirror

Posted at Oct 21 2010 08:56 AM | Updated as of Oct 21 2010 04:56 PM

MANILA, Philippines - Bureau of Internal Revenue (BIR) Commissioner Kim Henares said she is ready to back up the BIR’s sister agency, the Bureau of Customs (BOC), on its ongoing tax case against Pilipinas Shell Petroleum Corp., which threatened to file a countercriminal case against several government officials.

Henares said in an interview she is willing to testify in court and defend the actions of the BOC for filing a P24.5-billion case last week against Shell, the country’s second-largest refiner.

The BOC is seeking the P24.5 billion in back taxes from Shell for alleged technical smuggling, but Shell has denied this, claiming that the government has been misled in filing the case.

“If I am called to the witness stand, I will go…because the law clearly states that they [oil-refining companies] should pay excise tax for every product they produce,” Henares said.

Henares said the authority to release imported goods issued by the BIR for the release of Shell’s catalytic cracked gasoline (CCG) and light CCG without the payment of excise taxes is all subject to dispute. This means that the government may chase after Shell for its back taxes if the courts ruled in favor of the BOC.

Meanwhile, Customs Commissioner Angelito Alvarez said Shell should dispute the government’s claim in the courts and not through the media.

“I understand their coming up with a paid ad, but I hope they will take a look at the documents and submit their sworn counteraffidavits to justify their position,” he said.

Shell came out with a paid advertisement in newspapers on Wednesday explaining its side, and said that it will file charges against BOC officials for gross negligence, gross incompetence and defamation.

“Based on the evidence, it is very clear that we have an airtight case,” Alvarez said, expressing confidence that the smuggling case against Shell has its merits. He said his auditing background helped him understand the complexity of the case.

He said he also sought the advice of the Department of Finance and the BIR before filing the case.

Alvarez said he also has sent an executive briefing to Malacañang to appraise President Aquino on the case that was filed.

The BOC claimed that Shell made an “intentional misclassification and misdeclaration” of the company’s various petroleum importations between August 2005 and May 2009 to evade the payment of correct excise and value-added taxes.

BOC records showed that there were 52 import entries filed in 2007, 2008 and 2009, when Shell employees and customs brokers intentionally misclassified their shipments of unleaded gasoline, under Harmonized System (HS) Code 2710.1130 intended for Tetrapropylene.

“The ploy was obviously carried out to cheat the government of billions of pesos since Tetrapropylene was not among the articles enumerated under Section 48 of the National Internal Revenue Code as subject to the excise tax. Those acts of deception in 52 entries effectively deprived the government of lawful revenues from excise tax and VAT estimated at P2.48 billion,” Alvarez said last week.

Aside from the misclassification, the BOC claimed that Shell also misdeclared its importations between August 2005 and December 2008 as merely CCG or LCCG when, in fact, the corresponding invoices issued by Shell International Eastern Trading Co., as well as the documents provided by the shipping companies, described those shipments as unleaded premium gasoline.

The Tax Code pegs the excise tax for leaded premium gasoline at P5.35 per liter, while P4.35 per liter on unleaded premium gasoline.

As this developed, Malacañang said on Wednesday the move of Pilipinas Shell Petroleum Corp. to file countercharges against certain BOC officials over a P24.5-billion smuggling case against the oil company will not hinder the government’s drive against smuggling and tax evasion.

Responding to questions, Deputy Presidential Spokesman Abigail Valte said in a news briefing that Shell’s plan to file gross negligence, gross incompetence and defamation against certain customs officials is a “basic right of Shell as a company.”

“It will not be any obstacle to our efforts to catch tax evaders or smugglers,” Valte said.

Secretary Ricky Carandang of the Presidential Communications Development and Strategic Planning Office said the assumption is that the actions of both the BOC and Shell “are...done in good faith.”

“We’re all going through the process in a very open and transparent manner. It’s really a question of the process and the process is being followed. You file a case; they defend themselves. At this point, it appears to be an honest-to-goodness dispute over what rate of tax those products should be levied....So in the end, it will be settled by the courts,” Carandang said.