Fuel-marking contract to be bid out in Q3

THE GOVERNMENT hopes to launch the bidding process for the fuel-marking system, a measure intended to curb tax evasion, by the third quarter, the Department of Finance (DoF) said.

“We want to see some progress by the third quarter for the fuel-marking contract,” Finance Assistant Secretary Maria Teresa S. Habitan told reporters.

She said that the terms of reference (ToR) have been approved by the DoF, alongside other government agencies.

However, she said that the DoF has only a conservative estimate for the fuel-marking program’s resulting impact on fuel excise tax collections. She did not elaborate.

Fuel marking involves the use of low concentrations of dyes to be introduced into a shipment of fuel to mark its progress through the supply chain, at certain points of which taxes are paid. The absence of the marker dye when the government conducts random inspections will be considered prima facie evidence of nonpayment of taxes.

Finance Secretary Carlos G. Dominguez III said: “We are assuming that all fuel importers are paying their tax; we just want assurances that they are continuing to pay their tax.”

“They said it’s good to trust, but it’s better to verify. It’s a verification program,” he added.

Mr. Dominguez said that it would cost the government P2 billion to implement the measure, but noted that it is “not that expensive in relation to the entire potential revenue we are getting.”

Oil companies will absorb the nine centavos per liter cost of dyes, which will be passed on to consumers.

Finance Undersecretary Antonette C. Tionko said that although the ToR has been signed, the authorities are “ironing out certain issues concerning the procurement exercise with the Department of Budget and Management.”

The Asian Development Bank (ADB), in a 2015 study, estimated that the Philippines loses $ 750 million annually from fuel smuggling. A previous fuel-marking program was launched in 2007, but was halted in 2014 due to the costs.

“We’ve done extensive research on this thing. We had meetings with people in various parts of the world that are already implementing the fuel marking system. We are learning from everybody’s experience in Asia, Africa, Europe, so I think we will come out with a very very good program,” Mr. Dominguez said.

The fuel-marking program is authorized by the Tax Reform for Acceleration and Inclusion (TRAIN) law, or Republic Act No. 10963.

The law also mandates the issuance of electronic receipts and invoices, and the linking of point- of- sale machines to the Bureau of Internal Revenue.

“The invoicing is also proceeding, although we want to have it also as soon as possible because that would help in further reducing the number of days which VAT (value-added tax) refunds will be processed,” Ms. Habitan said.