by Ben Rosario October
15, 2016
Unless the Commission
on Audit (COA) and the Department of Energy (DOE) resolve the Malampaya gas
project tax controversy, the public should expect lower power supply at higher
rates.
Camarines Sur Rep. LRay
Villafuerte issued the warning as he urged COA and DOE to get their act
together to swiftly resolve the controversy in a manner that would benefit the
public.
Villafuerte, vice
chairman of the House Committee on Appropriations, said that besides
threatening the stability of the country’s energy supply, the failure of the
DOE and COA to immediately resolve the Malampaya tax issue could jack up
electricity prices and further spook investors.
The former Camarines
Sur governor was referring to the conflicting interpretation of the COA and DOE
of Presidential Decree 87 and the deal covering the Malampaya gas project known
as Service Contract 38 (SC 38).
“As correctly pointed
out by the DOE, the COA ruling could lead to an ‘exodus’ of investors from the
country’s power sector at a time when investments in this industry are badly
needed in the face of critical power supply vis-a-vis our fast-growing energy
requirements. We appeal to the COA and the DOE to resolve this issue
immediately,” Villafuerte said.
In a ruling, COA stated
that the income tax of the consortium handling the Malampaya project was
deductible from the government’s 60 percent share of the gas field’s royalties.
Thus, the consortium
members, which include Shell Philippines Exploration BV (SPEX), Chevron
Malampaya Llc., and Philippine National Oil Co.-Exploration Corp. (PNOC-EC),
should pay the government a whopping P151 billion in back taxes covering the
years 2002 to 2016, the state audit agency stated.
The DOE disagreed
It said state auditors
should consider the fact that government must honor the contracts of the
Malampaya gas project in Palawan.
The DOE cited as bases
PD 87 or the Oil Exploration and Development Act of 972 and PD 1459, which
authorizes the energy secretary to enter into petroleum service contracts.
Villafuerte said
failing to resolve the issue does not bode well for President Duterte’s
10-point socioeconomic agenda, in which one of the key goals is to increase the
country’s competitiveness and the ease of doing business in order to attract
foreign direct investments here.
As pointed out by
industry players, dunning power generation companies for supposed back taxes
could jack up electricity prices, a scenario that would hurt consumers and all
the more vex investors long complaining about the Philippines having among the
highest power rates in Asia.
Moreover, the COA’s
recent ruling that the income tax payments are supposed to be over and above
the government’s annual share from the Malampaya venture is the kind of
business policy flip-flop that the investor community has also complained about
in doing business in the Philippines, he added.
“Such public
disagreements between government agencies won’t help at all in encouraging
investments here. Continuity, predictability and consistency are what investors
look for when exploring business prospects. Changing the rules in midstream is
certainly not one of them,” said Villafuerte, who himself was a successful
businessman before entering the field of politics in the early 2000’s.
Villafuerte recalled
that President Duterte, in his inaugural address, ordered Cabinet secretaries
and heads of agencies “to refrain from changing and bending the rules of
government contracts, transactions and projects already approved and awaiting
implementation.”
“While the COA is an
independent institution, we strongly urge it to seriously ponder the
far-reaching consequences of its adverse ruling on the Malampaya project and
reconsider its decision,” Villafuerte said.
Villafuerte cited the
statement made by Meralco executives that a shutdown of Malampaya’s gas field
operations could lead to an energy shortage and trigger electricity rate hikes.
No comments:
Post a Comment