DOE lauds SC ruling on Malampaya tax case
The energy sector expects to welcome more investors to the petroleum and gas exploration sector after the Supreme Court cleared Malampaya contractors of P53 billion in income tax liabilities.
Department of Energy (DOE) Secretary Sharon Garin welcomed the higher court’s ruling on the income tax case filed against Shell Exploration B.V., PNOC Exploration Corp. and Chevron Malampaya LLC.
“We’re happy that the issue has been resolved … because it gives stability and security to the exploration of our investors. So it will encourage more,” the official told reporters on the sidelines of an event in Sorsogon City over the weekend.
“I’m happy that they already know because before, they didn’t know what it was. Now, they know,” she added. “And I think that will bring more investors to the Philippines for exploration.”
Last week, the high court upheld that the country’s share in the natural gas project’s profits already included the contractors’ income taxes.
The government and the three Malampaya contractors inked a service contract in 1990, stating that “contractors must remit 60 percent of the project’s net proceeds to the government.”
While they enjoy almost all tax perks, the group is not exempt from paying income taxes.
But the court highlighted a provision in the deal, which says the profit-sharing also “covers the contractor’s income taxes from 2002 to 2009.”
This issue surfaced after the Commission on Audit insisted that P53 billion had been deducted from the government’s share. It argued that “no law explicitly states that their income taxes should be part of the government’s share.”
The private contractors then challenged the matter before the court.
In favor of the Malampaya contractors, the high court said, “tax assumption is not tax exemption and contractors are still liable for income tax, but the government pays it on their behalf as part of its share in the project’s income.”
