Petron Bataan Refinery may get tax break from CREATE bill

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Petron Corporation may be getting its desired sigh of relief for its refinery in Limay, Bataan as the Congress-approved Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill would exempt petroleum refineries from taxes on crude oil imports.

Should President Rodrigo Duterte sign the bill into law without vetoing the pertinent provision, the Bataan refinery — the country’s only remaining facility of its kind — would be saved from total shutdown and thousands of jobs would be saved. The bill is now in Malacanang awaiting the President’s approval.

The provision on the exemption of refineries from taxes on imported fuel was reportedly introduced at the bicameral level recently.

A report by the Manila Bulletin quoted the provision in the bicameral version: “…Crude oil that is intended to be refined at local refinery, including the volumes that are lost and not converted to petroleum products when the crude oil actually undergoes the refining process, shall be exempt from payment of applicable duties and taxes upon importation.”

The said provision further reads: “…Applicable duties and taxes on petroleum products shall be payable only upon lifting of the petroleum products produced from the imported crude oil subject to rules and regulations that may be prescribed by the Bureau of Customs and the [Bureau of Internal Revenue] to ensure that crude oil not be lifted from the refinery without payment of appropriate duties and taxes.”

Prior to the bicameral version, both the House of Representatives and the Senate passed the bill, with the latter approving it on third and final reading on November 26, 2020. A month before that, Petron President and CEO Ramon Ang said that he would close the Bataan refinery “very soon” over what he calls as unfair taxation, specifically under the controversial Tax Reform for Acceleration and Inclusion (TRAIN) law.

Ang, then, announced in early December that the refinery was supposed to close in January. Following the announcement, refinery workers appealed to the local government of Limay to lobby for the refinery’s inclusion in the Freeport Area of Bataan, which was eventually granted. Nonetheless, Ang decided to continue with the facility’s economic shutdown this February, but stressed the possibility of a reopening in July should economic conditions improve.

Finance Sec. Carlos Dominguez has argued that Petron’s woes do not concern taxes, but rather of supply chain.

Meanwhile, Energy Sec. Alfonso Cusi said in a report by The Philippine Star that the exemption would level the playing field in the downstream petroleum sector. He noted, though, that refiners and direct importers currently do not pay duties for crude oil under Executive Order (EO) 890 or excise taxes under TRAIN, but rather do so for the actual sale of finished fuel products.

EO 890, signed by former Pres. Gloria Macapagal-Arroyo in June 2010, eliminated the tariffs on crude oil, refined petroleum products, and asphalt.

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