THE Department of Finance (DoF) aims to have the fuel marking system, a deterrent to smuggling, set up by the first half next year, as the procurement process gears up for launch.

The DoF is close to completing of the terms of reference (TOR) for procuring providers of the marking system.

“The TOR is almost done, the final version will be completed by the end of this month. It will be published in the newspapers,”  Finance Undersecretary Antonette C. Tionko told reporters last week at the DoF headquarters.

“Procurement is expected to start within the year. By December, the procurement process and finished by the first quarter, and we want to implement already by the second half,” she added.

Finance Secretary Carlos G. Dominguez III meanwhile said that the fuel marking system will be implemented alongside a series of random inspections.

“We will also check the distribution randomly,” he said, adding that the Bureau of Internal Revenue personnel will be trained on auditing procedures.

“Basically it’s an outsourcing contract, a service. We will not run it ourselves,” Mr. Dominguez said.

He said there are “many” interested parties for the fuel marking contract.

Ms. Tionko said some concerns of stakeholders are still being addressed in the TOR.

“They always have concerns, anything you change is their concern, at what point do we put the marker…It’s a bit technical, but the thing is each company has its own system. Those are the things we need to work on, it’s nothing fundamental but technical,” she said.

The DoF has allotted P2 billion for the procurement of service providers, and expects to generate some P25 billion in additional annual revenue.

The fuel marking scheme is part of the Tax Reform for Acceleration and Inclusion Act — which is currently undergoing plenary debate in the Senate.

The measure involves the use of low concentrations of markers or dyes to be blended with the fuel, to mark the stages undergone by a particular batch of product, which will determine whether shipments have gone through the legal supply chain. Absence of the marker will be taken as prima facie evidence that the petroleum products are imported or withdrawn without the payment of excise tax.

The dyes are expected to cost some P.09 centavos per liter, to be passed on to consumers.

The DoF estimated revenue losses from smuggled or misdeclared fuel of P26.87 billion in 2016.

In a 2015 Government Brief by the Asian Development Bank, which discussed fuel marking, the bank estimated $750 million, or P37.5 billion worth of foregone revenue due to smuggled oil in the Philippines for 2014.

The Institute for Development and Econometric Analysis  on the other hand estimated that “smuggled gasoline accounts for an average of 23% of gasoline consumption from 2000 to 2006,” while “smuggled diesel accounts for an average of 6%.” 

In 2016, the government collected P52.56 billion from petroleum products.

The earlier implementation of the fuel marking system was mandated by Finance department Order 23-07 in 2007. The Department of Energy however in 2013 issued a memorandum circular stating that starting 2014, oil companies shall no longer be required to use a chemical marker to their fuel products. — Elijah Joseph C. Tubayan

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