2008-07-27 15:16:02 - Philippine politicians want oil firms to be taxed on excess profits

Manila

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Several members of Congress will likely push for a temporary "windfall profit tax" on the country's oil firms should they continue to reap "excessive" earnings at expense of consumers, lone Catanduanes Rep. Joseph Santiago said Sunday.

Santiago said Congress has the option to impose an extra tax on any unusual profits that ensue from a sudden windfall

gain to a particular company or industry.

"It is not unlawful for the oil firms to make some money. They are entitled to a reasonable return on their investment. However, if they are already making outrageous profits to the detriment of consumers, then we may consider a short-lived tax on their excessive earnings," he noted.

Santiago said they can impose the extra tax on the dividends that they distribute to their shareholders, or in some other way that the oil firms cannot simply pass on to consumers the cost of the additional levy.

"This way, consumers won't pay for the tax," he said.

Santiago said the extra government income from the windfall profit tax can then be used to augment direct energy subsidies to marginal households hurt most by soaring fuel prices.

"Alternately, government can also use the new income to push the development and local production of renewable and cleaner energy sources. This will eventually lessen our dependence on foreign oil and at the same time reduce harmful emissions," he added.

In 1980, the US Congress imposed a temporary windfall profit tax on the sky-high earnings of oil producers that gained in a big way from the sharp increase in oil prices during the embargo imposed by the Organization of Petroleum Exporting Countries, he pointed out.

He said the Crude Oil Windfall Profit Tax Act in the US lasted for eight years, until it was repealed in 1988, amid the fall in oil prices.

However, steep pump prices and record-high profits generated by American oil firms have prompted several members of the US Congress to seek the revival of the windfall profit tax.

Santiago's remarks came not long after Cebu Rep. Eduardo Gullas bared that the country's two biggest oil firms -- Pilipinas Shell Petroleum Corp. and Petron Corp -- netted nearly P70 billion in cumulative net profits in the first 10 years of oil deregulation.

The two oil refiners realized the bulk of their net profits over the last three years, as they enjoyed massive powers to command pump prices as result of highly volatile crude oil prices that have more than tripled.

Gullas has also introduced House Resolution 672, urging the House committee on energy "to investigate and report the facts relating to any oil price manipulation or similar abuses committed by any person or corporation."

The research outfit Ibon Foundation Inc. has claimed that local petroleum products are overpriced by at least P12 per liter.

Despite falling oil prices in the world market, Shell and Total Philippines Corp. raised diesel and kerosene prices by P1.50 per liter on Saturday.

Petron, Chevron Philippines Inc. and independent oil firms are expected to announce similar increases shortly.