Malampaya consortium turns to DOE for help in COA tax claim

The Commission on Audit (COA) is questioning some billion in income tax charges for the Malampaya contractor that had been levied against the government’s royalty share in the gas field’s revenues.

An official of the Department of Energy (DOE) has acknowledged that they are now in discussion with Malampaya contractor Shell Philippines Exploration B.V. (SPEX) as to how this dilemma can be “resolved satisfactorily between and among parties. “

The energy official said “they are reviewing the provisions of the contract “–mainly the stipulations on income tax payments set forth under Service Contract 38 covering the Malampaya field.

In an interview with reporters, SPEX managing director Sebastian Quinones has affirmed the on-going discussions that they are having with the energy department.

When asked if they see this as probable ‘rule change at mid-game’ on petroleum exploration and development in the country, Quinones just insisted that they would want this addressed “with the help of the government.”

The Royal Dutch Shell-led consortium is also tight-lipped when pressed further about possibility of eventually elevating such legal and policy question to international arbitration proceedings.

The COA has been stipulating that there is no law in the Philippines which could justify the charging of contractor’s income tax on government’s royalty share in resource development.

Nevertheless, legal experts opined that the Philippine Constitution guarantees ‘sanctity of contracts’ and that no law shall be passed to abridge such.

The energy department, along with the Malampaya consortium comprising of SPEX, Chevron Malampaya LLC and state-owned Philippine National Oil Company-Exploration Corporation (PNOC-EC), already justified the ‘income tax charging’ in an earlier correspondence to COA.

However, the state auditors thumbed down their position, thus, bringing back this tax policy drawback to square one.

Since its commercial operations in 2001, the Malampaya field already yielded US8.0 billion in revenues share for the Philippines – shared by the national government and local government units straddled by the Malampaya facilities from Palawan to Subic and Batangas. (MMV)