Fuel marking’s TOR out soon— BOC chief » Manila Bulletin Business

By Chino S. Leyco

The Bureau of Customs is planning to issue the terms of reference (TOR) for fuel markers within this week that once implemented, could potentially raise revenues from petroleum products by nearly a third.

MB File- Customs Commissioner Nicanor E. Faeldon

Customs Commissioner Nicanor E. Faeldon disclosed that several foreign fuel-marking providers have already expressed interest in participating in the bidding for the project, which will use advanced technology molecular markers.

“We’re finalizing the terms of reference. We’re targeting the TOR to be out within this week so that formally we can now invite everyone to participate,” Faeldon said in an interview.

“All of them [interested companies] are foreign entities, because we don’t have the technology here in the Philippines,” he added.

To prevent fuel fraud, Faeldon said the government will use molecular markers instead of simple colored dyes to mitigate tax evasion and raise more revenues.

“What we used for the pilot test several years back, I think, was the dye. This time it is molecular marker because it’s more efficient,” the Customs chief explained.

Faeldon, meanwhile, expects that once the fuel marking system is in place beginning January, excise tax collection from petroleum would increase by around P10 billion to P15 billion.

“If the data of everybody is accurate, we are expecting between 20 percent and 30 percent increase in revenues for that. Based on last year’s collection, that excise tax was P52 billion, if you say 20 percent of that, that’s the additional revenue,” Faeldon said.

The implementation of the fuel marking scheme, however, will require the government to shell out around P2 billion.

“The capital outlay [for the project] is around P2 billion only, that’s one time, just for the facilities, like laboratory,” Faeldon said.

The bidding process for fuel markers will commence 15-days after the publication of the TOR.

“There’s enough time, more or less six months for the bidding process so that by January, it will be awarded,” Faeldon said.

Finance Undersecretary Karl Kendrick T. Chua earlier said the mandatory fuel marking system, which is included in the first tax reform package, is expected to plug P27 billion in annual losses incurred from oil smuggling.

Chua explained the system was designed to curb smuggling and misdeclaration of petroleum products that was costing the government P26.9 billion to P43.8 billion in foregone revenues each year.

Under package one of comprehensive tax reform package (CTRP), the fuel marking plan would be implemented beginning next year by Customs, with the assistance of the Bureau of Internal Revenue.

The procurement process will be done through competitive bidding, Chua said.

Implementing a fuel marking system is among the provisions under the substitute House Bill No. 5636 approved last May 3 by the House ways and means committee covering the first package of the CTRP.

“The project cost for a five-year implementation is expected to be fully recoverable as early as the first year of implementation as the unit cost of fuel marking is as low as 9 centavos per liter based on past pilots,” Chua said.

Tags: Bureau of Customs, competitive bidding, Nicanor E. Faeldon, petroleum products, tax reform package, Undersecretary Karl Kendrick T. Chua