DOE backs bid of oil players to keep perks despite ‘Trabaho’ bill

By Lenie Lectura - December 3, 2018

https://businessmirror.com.ph/doe-backs-bid-of-oil-players-to-keep-perks-despite-trabaho-bill/

ENERGY Secretary Alfonso G. Cusi has thrown his full support for the stand of the petroleum industry to keep the incentives for the upstream
petroleum industry.

“We submitted our position.  We are so far behind our neighbors that if we are going to restrict them further, then what will happen to the petroleum industry? We are supportive of their call to provide them the necessary incentives,” said Cusi.

The Petroleum Association of the Philippines (PAP) has asked the government not to remove incentives for the upstream petroleum industry amid hard times in discovering new reserves.

The PAP cited fiscal incentives such as tax-free importation of equipment and supplies, exemption from all taxes except income tax, income-tax assumption (i.e., payment of income tax out of the government’s share), accelerated depreciation, free market determination of crude oil price, and easy repatriation of investments and profits, are cited under Presidential Decree (PD) 87.

These incentives will no longer be offered when the proposed Package 2 of the tax-reform program of the Duterte administration  is implemented. The House of Representatives Package 2 version is called Tax Reform for Attracting Better and High-Quality Opportunities, or “Trabaho bill.”

PD 87 was issued by former President Ferdinand Marcos to amend the earlier PD 8, which promotes the discovery and development of the country’s indigenous petroleum resources.

Cusi stressed that the Philippines has been grossly trailing behind neighbors in terms of petroleum exploration and development activities.

“It is high time that we step up. We need to attain energy security and sustainability to minimize our vulnerability to global oil price shocks.

Harnessing our indigenous energy resources would also go far in helping us meet the country’s increasing energy demand as we continue to usher in economic progress,” he added.

The chairman of the Senate Energy Committee also expressed support for the PAP position.

“They are not asking money from the government. They just want consistency and stability. So, I’m inclined to support that they not be ncluded in TRAIN 2,” said Sen. Sherwin T. Gatchalian.

The PAP had noted that commercial oil and gas discoveries happened only after the promulgation of PD 87 in 1972.

“None of the major oil companies are engage in oil exploration. At the moment, it’s a wait-and-see attitude on the part of major companies. TRAIN seeks to minimize or remove incentives. While we support the tax reform in general, we believe it’s not time to remove incentives in the petroleum industry,” said PAP President Rufino Bomasang.

He stressed that for the Philippines to attract technically and financially qualified exploration companies, the incentives should not be touched.

PAP Vice President Edgar Benedict Cutiongco called for stability in fiscal regime. “We don’t want to be included in TRAIN 2. The main effect on us is that if these incentives are no longer present, investors will go to Malaysia, Indonesia, Thailand where they perceive a stable regime,” he said.