Finance Secretary Carlos Dominguez III said he expects the fuel marking and monitoring system, which is a part of the proposed tax reforms, to be in place by the second half of 2018 to curb smuggling in the oil sector.
Dominguez said in a statement over the weekend the government needed to decide what kind of fuel marking service it would have to implement, given the variety of offers it received from private providers and the kind of training that personnel from the Bureau of Internal Revenue and Bureau of Customs would have to undergo.
Dominguez said he agreed that the service and supply of equipment for the fuel marking system should get the approval of the Investment Coordination Committee as suggested by the Department of Budget and Management.
“I said ‘let’s just put it through ICC.’ We will have a meeting on the 6th [of December] anyway, so whether or not it is needed we will just put it before them. Anyway there is no controversy over that,”
Dominguez said.
Finance Undersecretary Antonette Tionko said the terms of reference for the system were almost completed and would be available by the end of the month, with the procurement process expected to start by December.
“The procurement process [is expected to be] finished by the first quarter, and we want to implement already by the second half,” Tionko said. Tionko said the procurement and implementation schedule for the system remained on target.
Dominguez said the government was “basically outsourcing” the service because it did not have the technical expertise to put in place fuel markers on petroleum products.
Tionko said the government was carefully crafting the TOR to ensure that it was able to acquire the service that would be most effective in curbing oil smuggling, given the various technologies offered by fuel marking system providers.
The mandatory implementation of a fuel marking and monitoring system is among the tax administration reforms included in the proposed Tax Reform for Acceleration and Inclusion Act now pending in Congress.
House Bill 5636, the Train version approved by the House of Representatives, specifies a fuel marking provision in the measure. A similar provision is also written in the Senate version of the Train bill.
The said revenue losses (value-added tax and excise taxes) from smuggled or misdeclared fuel reached P26.87 billion in 2016 alone. Julito G. Rada
The Asian Development Bank pegged it at a higher P37.5 billion annually while a study commissioned by the local oil industry estimated foregone revenues at P43.8 billion per year.
The Institute for Development and Econometric Analysis said “smuggled gasoline accounts for an average of 23 percent of gasoline consumption from 2000 to 2006,” while “smuggled
diesel accounts for an average of 6 percent.”