PH oil firms support removal of VAT on fuel at importation point

Major oil industry players expressed support for removing the value-added tax (VAT) on petroleum products at the point of importation.

During a recent Senate PROTECT (Proactive Response and Oversight for Timely and Effective Crisis Strategy) Committee hearing, industry players said  this move would be simpler to implement than retail-level adjustments and would lead to a direct reduction in pump prices.

Those present at the Senate PROTECT hearing included representatives from the Independent Philippine Petroleum Companies Association, Shell Pilipinas Corporation, and Petron Corporation.

Senator Bam Aquino asked industry representatives to clarify their stance on proposals on suspending or reducing VAT on fuel, amid concerns over potential complications in accounting and pricing systems.

Tanya Samillano, president of the Independent Philippine Petroleum Companies Association, explained that eliminating VAT upon cargo arrival would prevent companies from shouldering the tax upfront, thereby lowering overall costs.

“In our position…it’s easier for us to implement reduced prices when VAT is removed,” Samillano said.

She assured Aquino that these savings would be fully passed on to consumers.

Shell Pilipinas Corporation President and CEO Lorelie Quiambao-Osialadded that removing VAT is faster to implement than other measures, though she noted that any adjustment should be applied "end-to-end" to maintain pricing consistency.

Petron Corporation General Manager Lubin Nepomuceno likewise agreed, saying the proposal reflects the industry’s position on VAT.

Aquino noted that oil companies themselves do not foresee implementation difficulties if the VAT is removed at the point of entry.

However, Department of Finance (DOF) Undersecretary Karlo Fermin Adriano raised concerns regarding the complexity of the VAT system.

He noted that if fuel becomes VAT-exempt, oil companies may be unable to recover input taxes paid on assets like machinery and transport equipment, which could result in those costs being passed back to consumers.

“If the output is exempt and you have inputs wherein you paid the VAT, then you cannot claim your inputs,” he said.

He explained that oil companies pay VAT on assets such as machinery and transport equipment.

If fuel becomes VAT-exempt, these input taxes cannot be recovered—costs that may eventually be passed on to consumers, he said.

-Paraluman News