THE ongoing tax dispute between the Bureau of Customs (BOC) and oil giant Pilipinas Shell Petroleum Corp. (PSPC) is “discouraging” to the investors.

The European Chambers of Commerce of the Philippines (ECCP) stated this in the letter it sent to Bureau of Internal Revenue (BIR) Commissioner Joel Tan Torres. ECCP expressed concerns on the still unresolved tax row.

“We view this development with grave concern because of the far reaching implications that this case is showing. First is that the country is discouraging investment in the manufacturing because raw materials are taxed and the finished products are taxed again and such double taxation favors traders over manufacturers,” said ECCP president Hubert d’ Aboville.

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The ECCP stressed that the Philippines is being regarded with “huge potential for growth,” saying investments must be encouraged.

“For any country to be attractive, the government must provide the necessary elements of a good peace and order situation, adequate infrastructure, a competent pool of human resources, a level playing field in a competitive environment, and stability of rules and regulation. On this last point, the record of the Philippines has not been good,” ECCP further stated.

The European Chambers also scored the reversal made by Commissioner Torres on the decision rendered by the Department of Energy and affirmed by three former Commissioners of BIR that the Catalytic Cracked Gasoline (CCG) being imported by Shell are raw materials and should not be subjected to tax.

“An opinion by any government agency [that] can be reversed anytime, so, there is no stability that business expects and investment decisions are built upon,” the letter read.

At the same time, ECCP said the “strong arm tactics” being employed by BOC to force Shell to pay the P7.3 billion disputed back taxes is not a good act.

“ECCP urges government/the BIR to revisit the reversal of previous rulings to address these concerns and assure existing and potential investors on policy stability and fairness in a free market,” the two-page letter concluded.

To recall, Shell warned that the company may opt to close its refinery in Batangas if the BOC will seize their P43 billion worth of CCG shipments arriving next month in order to force them to pay the P7.3 billion back taxes covering 2004 until 2009.

Shell officials also said that possible fuel supply shortage to take place if their shipment will be confiscated.

Shell controls 34 percent of the market and employs nearly 18,000 workers nationwide. (MSN/Sunnex)