THE Department of Finance (DoF) has debunked Petron Corp.’s claim that the higher fuel excise tax implemented under Republic Act 10963, or the “Tax Reform for Acceleration and Inclusion Act” (Train), dragged its net income down in the first half of the year.
In a statement on Friday, Finance Undersecretary Gil Beltran said that scenario was “highly unlikely,” given the improved January-to-June income performance reported by Petron’s rivals, like Pilipinas Shell Corp.
Petron said last week its net income plunged by 72.6 percent to P2.6 billion in the first six months from P9.5 billion in the same period last year. It claimed that price increases resulting from Train’s implementation led to a decrease in its domestic fuel sales.
The first package of the government’s Comprehensive Tax Reform Program that took effect at the start of 2018, Train implemented a gradual increase of oil excise taxes by up to P6 per liter over three years, with lower rates for “essential products,” such as diesel, kerosene and liquefied petroleum.
“We looked at their financials and it seems highly unlikely. It is misleading for Petron to blame Train for their decrease in sales,” said Beltran, also the Finance department’s chief economist.
According to him, the DoF looked at recent reports from other major oil players, including Shell, which also has a refinery.
“Shell actually reported that, despite lower profits in the first half of 2019 compared to the same period in 2018, [it] saw higher retail volume growth across all business segments in the second quarter, which is the opposite of the Petron story,” the official said.
“In addition, Petron’s message that higher prices led to a decline in sales is inconsistent with their history,” he added.
The Finance department found that, despite the peak of gasoline and diesel retail prices during the first quarter of 2012, Petron revenues still increased by 17 percent or P10.6 billion from the amount recorded the year before.
In the first half of 2012, when the oil price was highest, Petron’s income grew by 43 percent, Beltran said.
“Perhaps, Petron should look inward to understand the true cause,” he added.
Petron also reported that their indirect expenses grew by 78 percent in the first quarter of 2019, which suggests lower efficiency, resulting in the income decrease, according to Beltran.
“Blaming Train for their income drop is unwarranted. Taking into account much higher indirect expenses, it appears the reason for Petron’s performance can be attributed to internal issues or, perhaps, weakening market share because they refuse to adjust their prices, and not higher excise tax,” he said.