DOE asks COA to dismiss Malampaya tax case ruling


The Department of Energy (DOE) asked the Commission on Audit (COA) to dismiss its ruling to claim billions of pesos from the Malampaya project for tax underpayments.

“We studied everything. I asked for the transcript of the previous discussions. I asked our lawyers to review all the documents, and they said the previous stand of the DoE has to be sustained. And we supported that,” Energy Secretary Alfonso Cusi said after a Senate budget hearing yesterday.

In a letter sent to COA on September 19, Cusi said the DOE is “still adopting the aforementioned motion for recommendation as the official DOE position in the subject controversy.”

“The foremost consideration in the mind of foreign investors in deciding where to invest is the predictability, certainty and consistency of investment rules and regulatory regime of a country,” Cusi said.

He said it is important for the country to “observe the sanctity of contract in our commercial transactions.”

In 2009, a COA report on the DOE said there were underpayments in corporate income taxes worth P53.4 billion from the consortium.

COA on April 6, 2015 denied DOE’s petition to review the audit findings on the Malampaya projects in Palawan. This was backed by the consortium consisting of Shell Philippines Exploration B.V. (SPEx), Philippine National Oil Co. Exploration Corp., and Chevron Malampaya LLC.

On June 16, 2015 the DOE filed a motion for reconsideration on COA’s ruling and said the decision contradicts the underlying laws that run the upstream oil and gas industry.

DOE Director for Legal Division Arthus Tenazas said the COA decision is “an undue interference to the powers of the DOE to administer and implement Presidential Decree (PD) 87 and PD 1459.”

The energy department said the 60 percent share of the government including income tax is based on the provisions of PD 87, Section 12: “the contractor is exempt from all taxes except income tax.”

Its Section 18 (b) also states, “In no case shall the annual net revenue share of the government, including all taxes paid by or on behalf of the contractor, be less than 60 percent of the difference between the gross income and the sum of the operating expense and Filipino participation incentive.”

Section 1 (a) of PD 1459 “provides that the share of the government including all taxes shall not be less than 60 percent of the difference between the gross income and the sum of the operating expenses and such allowances such as the secretary of Energy may deem proper to grant.”

The COA “totally overstepped and exceeded the legal bounds of COA’s constitutionally mandated functions tantamount to a gross abuse of discretion,” Tenazas said.

To date, the total uncollected amount from Malampaya covering the years 2002 to 2016 reached P151 billion.