The National Tax Research Center (NTRC) has backed the proposal of the House of Representatives and the Department of Finance to revive the fuel-marking scheme to prevent smuggling.
In a position paper submitted to the lower chamber, NTRC acting Executive Director Trinidad A. Rodriguez said fuel marking will prevent fuel fraud and smuggling while raising government revenues.
Fuel marking is one of compensatory measures under the proposed tax-reform package.
“In general, fuel marking adopted by various countries aims to prevent fuel fraud and smuggling,” Rodriguez said.
He said the fuel marking scheme has a “huge” benefit to the government as it will increase tax receipts—without raising taxes—and sales revenue from increased volumes of official fuel in legal circulation.
“[It will also] enhance control to improve tax compliance and mitigate against tax evasion while minimizing losses from fuel fraud, hence the corresponding uplift in fuel revenues and tax receipts provide measurable returns on investment,” Rodriguez added.
He added it will also ensure that government bodies and regulators are able to collect the appropriate amount of revenue from excise tax on fuel.
“[Fuel marking will] prevent the illegal import of no or low-tax products and the dumping of transit, export or subsidized fuels,” Rodriguez said.
According to Rodriguez, governments around the world adopt fuel-marking scheme as a tax administration measure to prevent fuel fraud and smuggling due to unequal tax rates imposed on different kinds of fuels.
He said fuel-marking scheme is intended to monitor to correct payment of taxes and prevent revenue loss arising from illicit transfer of fuel.
“Unfortunately, there is no enough available data with regard to the pilot testing of the fuel marking in the Philippines to ascertain the effectiveness of the program to curb smuggling,” Rodriguez said.
“However, based on the experiences of other countries, the implementation of fuel marking enables their governments to raise more revenue by preventing fuel smuggling and adulteration, hence, fuel marking is a worthy undertaking,” he added.
Rodriguez noted that fuel marking is not new in the Philippines. As early as 1983, chemical markers have been used to monitor petroleum products quality.
But, in January 2014, he said the Department of Energy discontinued the use of chemical marker on fuel because it adopted a more practical product-quality monitor procedure though direct and indiscriminate product sampling and resting to check compliance with the Philippine National Standard.
House Committee on Ways and Means Chairman and PDP-Laban Rep. Dakila Carlo E. Cua of Quirino, principal author of the tax-reform package, said setting up a fuel marking and monitoring system is expected to increase revenue from fuel taxes and high-quality petroleum sold in the market.
“This step will certainly plug the leakage of duties and taxes due on this commodity and protect both the consumers and the environment,” Cua added.
Image credits: Bloomberg
