Commission on Audit

DOE, BIR should seek arbiter over P18-billion tax dispute- state auditors

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DOE, BIR should seek arbiter over P18-billion tax dispute- state auditors
The Department of Energy and Bureau of Internal Revenue are clashing over taxes reaching P18 billion

MANILA, Philippines – State auditors ruled that the Department of Energy (DOE) and Bureau of Internal Revenue (BIR) should seek adjudication over the P18.4-billion excise tax assessment on the removal and export of condensates generated by the Malampaya project operations from 2005 to 2018.

In a five-page decision, the Commission on Audit (COA) said it has no choice but to throw out BIR’s money claim petition filed in February 2020 against DOE because it does not have jurisdiction over the case.

It added that “substantive issues” raised in the case were beyond the agency’s competence.

“These issues which involve mix of questions of law and of fact are actually controversies between a department and a bureau of the national government – the DOE on one hand, and the BIR on the other. Therefore, the settlement of such controversies falls under the jurisdiction of the Office of the Solicitor General,” the ruling read.

What happened

The BIR sought a P4.4-billion payment from DOE for deficiency excise tax from 2001 to 2008 on the removal and export of condensates which are used for plastic products or fuel for heating.

In August 2011, the DOE settled just over half of it – P2.36 billion – covering the period from 2001 to the first half of 2005.

The DOE didn’t pay the rest, arguing that it was exempted once an amendment to the tax code – which spared natural gas from excise tax – took effect in July 2005.

In November 2018, the BIR assessed that the DOE owed them P18.4 billion in excise tax from July 2005 to September 2018.

The DOE objected, insisting it is not liable to pay excise taxes because it is only a grantor of the mining rights, and condensates are exempt from excise taxes because they are “simply natural gas in a liquified state.”

Subsequently, the BIR formally requested the DOE to settle its deficiencies, a move which the DOE failed to challenge within 30 days.

When the BIR’s order became final and executory, it issued a warrant of distraint and/or levy against DOE in September 2019.

DOE, however, asked that the warrants of garnishment be removed, saying it had not received the formal letter of demand with final assessment notice.

In November 2019, the Court of Tax Appeals junked a DOE petition seeking to review the case, due to lack of jurisdiction. –

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