The Philippines: Philippines establishes fuel marking programme

Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN), revising the outdated National Internal Revenue Code of 1997 took effect on January 1 2018. Its objective is to "correct a number of deficiencies in the tax system by making it simpler, fairer and more efficient". A new section on fuel marking was introduced in the TRAIN to curb smuggling and misdeclaration of petroleum products which has resulted in revenue losses from excise and value added taxes estimated by the Asian Development Bank (ADB) in Philippine pesos at 37.5 billion annually.

All petroleum products that are refined, manufactured, or imported into the Philippines that are subject to the payment of duties and taxes, e.g. gasoline, denatured alcohol used for motive power, kerosene and diesel fuel are covered by the fuel marking programme. Fuel marking has been defined as "the introduction of a unique identifier (bio-chemical liquid) in trace quantities into petroleum products at depots before distribution into the market. The marker creates a "finger print" and provides a secure, tamper-proof method of authentication. Marked fuel can be distinguished from unmarked fuel through a process of testing using specialised detecting equipment". Under the TRAIN, the "use of a fraudulent marker on the petroleum products shall be considered as prima facie evidence that the same has been withdrawn or imported without the payment of taxes and duties due thereon." Presently, on-site assessment of the oil firms' importation, refining and manufacturing facilities are ongoing to prepare for the establishment and operation of fuel marking and field testing. Also, the marker to be used is being tested by the Department of Energy and the Department of Environment and Natural Resources.

The government shall be subsidising the cost of the official fuel markers in the first year of implementation, and costs in the succeeding years shall be borne by the refiner, manufacturer, or importer of the petroleum products. The joint venture of SGS and SICPA was awarded fuel marking provider in October 2018.

Offences relating to fuel marking are punishable by fines ranging from PHP2.5 million to PHP10.0 million and imprisonment from one year to eight years. The following will be guilty of fuel marking offences: (i) persons engaged in sale, trade, delivery, distribution, or transportation of unmarked fuel in commercial quantities held for domestic use or merchandise, (ii) persons who cause removal of official fuel marking agent from marked fuel, or dilution of fuel intended for sale (iii) persons making, importing, selling, using or possessing counterfeit fuel markers, (iv) persons who attach directly/indirectly through any covert act, whatever quantity of any unmarked fuel or counterfeit additive in the vicinity of innocent individuals.

Editha R Hechanova

Hechanova & Co., Inc.Salustiana D. Ty Tower104 Paseo de Roxas AvenueMakati City 1229, PhilippinesTel: (63) 2 812-6561Fax: (63) 2 888-4290editharh@hechanova.com.ph 

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