A FUEL marking system intended to deter smuggling is now being tested in the facilities of large oil firms in preparation for full implementation next year, the Finance department said Wednesday.

Finance Undersecretary Antonette C. Tionko said the department is marking fuel manually while a team is currently working on automating the system to handle larger volumes at the refinery and tank farm level.

“The team is in the process of working with the big refineries for installation of the automatic injection of the marker. In the meantime, the marking is being done manually. For the big refineries, (the marker) will have to go through their equipment and it (needs to be) automatically injected because of the volumes,” Ms. Tionko said during a Senate hearing on the Department of Finance (DoF) budget for 2020.

Fuel marking is intended to indicate that tax has been paid on a particular batch of fuel products. The absence of the dye can be taken as prima facie evidence that a particular shipment is not tax-compliant.

Ms. Tionko said full implementation is scheduled for January pending the outcome of the tests.

The government is estimated to lose about P40 billion a year from fuel smuggling, while the marking system could generate an additional P20 billion in revenue in the first year of implementation.

“We’re hoping to collect at least, by next year, P20 billion, which is half of the estimated amount of revenue lost to smuggling,” she said.

The marking costs around P0.69 per liter will be borne by the government during the first year of implementation while beyond that period oil firms will have to absorb the cost or pass it to consumers, Customs Assistant Commissioner Vincent Philip Maronilla said in an interview early this month.

Fuel marking was authorized by the Tax Reform for Acceleration and Inclusion (TRAIN) Law.

Finance Secretary Carlos G. Dominguez III reported during the budget hearing that revenue from TRAIN measures grew by 9.8% in the first half of 2019 to P55.6 billion, up 65% from a year earlier.

Mr. Dominguez said the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BoC) have exceeded their TRAIN targets by P1.8 billion and P1.7 billion, respectively.

Republic Act No. 10963, or the TRAIN Law took effect in January 2018 as the first package of the Comprehensive Tax Reform Program (CTRP). This lowered personal income tax but increased taxes on oil, automobile and tobacco products, among others.

Mr. Dominguez also said tax collections in the first eight months of the year rose 9.8%.

The BIR’s collections grew by 10.6% during the period, while revenue generated by the BoC rose 7.2%.

“We are confident this growth will be sustained in the coming period through continuing administrative reforms and the completion of the comprehensive tax reform program that will make our tax system simpler, fairer and more efficient,” he said.

“In both revenue agencies, we are automating processes and strengthening control measures against slippages,” he added. — Beatrice M. Laforga