DOJ Opinion No. 085, s. 1980

DOJ OPINION NO. 085 , s. 1980 1st Indorsement June 4, 1980 Respectfully returned to the Presidential Executive Assistant, Malacaang, Manila, the within query of Assemblyman Emmanuel Pelaez regarding the legal authority under which "the increased fuel taxes" are "being imposed and collected", which has been referred to this Office for "comment and recommendation". prcd The accompanying papers disclose that, sometime in August of last year, Assemblyman Pelaez directed the above said question to Ministers Virata and Velasco at the Batasang Pambansa. In a letter to Assemblyman Pelaez dated August 8, 1979, Minister Velasco explained that the legal basis for the imposition by the Board of Energy of Payments to the Special Fund, "is found in Section 8(j) [formerly Section 7(j)] and Section 17 [formerly Section 15-A] of Republic Act No. 6173 as amended by P.D. 456 and P.D. 1128". It appears that Assemblyman Pelaez entertains "very serious doubts . . . about the legality and validity of the imposition of the increased fuel taxes" alleging that "neither section (section 7(j) and section 17 of RA 6173) authorizes the Board of Energy to require the payment of the additional impost levied on the sale and disposition of refined petroleum products since August 1, 1979", leading him to the conclusion that the government "might be exacting payments illegally." As we see it, the fuel tax increased referred to in the hereinquery were those imposed in August, 1979. The latest round of increase, which was made in February, 1980, should render academic the questions raised by Assemblyman Pelaez regarding the August 1979 increases. Accordingly, we shall hereunder pass upon the issue with reference to the latest augmentations (in February 1980) of the fuel imposts and show that there is legal authority for the government to exact such payments. We understand that the existing impositions on fuel oil are as follows: (1) the Equalization Difference imposts (2) the Special Fund impost, (3) the specific tax and (4) the Energy Development impost; and that in the case of premium gasoline, for example, these impositions are: P0.73 for the equalization difference, P0.29 for the special fund, P1.00 for the specific tax and P0.19 for the energy development impost (See WPP Composition Analysis as of February 9, 1980, issued by Petrophil Corporation). We also understand that the Equalization Difference imposts constitute contributions of fuel users to the Crude Equalization Special Fund, which was created to assure the country of a steady supply of oil; that, in spite of the fact that from the time that the fuel price adjustments were imposed in August, 1979 the cost of imported petroleum had risen continuously, the government did not authorize parallel accretions in local fuel prices, but merely subsidized the increase in the costs of importations by the oil companies; that, in effect, from last August up to the latest increases in February 1980, the consuming public had been paying less than the normal market price of petroleum; and that, as the Fund is, as a consequence, now in the red, and has to be replenished, the Equalization Difference imposts were imposed last February. From the foregoing, it is clear that the Equalization Difference imposts do not partake of the nature of a tax, the imposition of which must be by or pursuant to law. In exacting the Equalization Differences imposts, the government is only collecting from oil consumers the amount of its subsidy, for the cost increases of imported crude, as above-stated, which it did not then pass on to the latter. Stated differently, the Equalization Difference payments are made by the end-users for what they owe the government; therefore, no express enabling authority is necessary for such collection. Regarding the Special Fund impost, Section 8(j) of Republic Act. No. 6173, as amended by Presidential Decree No. 456, which has been invoked in support thereof reads: "SEC. 8(j). Whenever an authorized increase in the prices of petroleum products would result in an extraordinary gain from existing inventories, the Commission is hereby empowered to take measures, including the payment by the persons or companies benefited, to a Special Fund which is hereby created, of such amounts as the Commission may determine in an appropriate order as would assure that said extraordinary gain, shall redound to the public interest." We agree with Assemblyman Pelaez that this provision only authorizes the exaction of a "windfall profits" tax, which is collected from oil companies for "an extraordinary gain from existing [oil] inventories" resulting from "an authorized increase in the prices of the petroleum products", whereas the Special Fund impositions are paid by the consumers. Nonetheless, we think that the Special Fund imposition finds its statutory basis in Section 17 of Republic Act No. 6173, as last amended by P.D. No. 1633 , which, it should be emphasized, is a different provision from that quoted in Minister Velasco's letter mentioned above (Sec. 17 of RA 6173, as amended by PD 456 and PD 1128) and which, as thus last amended, now reads: "Section 17. Payment to the Special Fund. In addition to the payments that may be required under Section 8(j) hereof, the Board of Energy is hereby empowered to require, through an appropriate Order, payment to the Special Fund created under Section 8(j) of this Act, of amounts not exceeding a weighted average of Thirty Centavos (P0.30) per liter of all refined petroleum products , as certified by the President of the Philippines, taking into account the requirements and purposes of the Special Fund, the effect of the payment on prices of petroleum products and corollarily, its cost impact on the economy and/or the consuming public and the cost and profit levels of the industry." (Emphasis supplied). It is quite clear from this provision, as now amended, that Assemblyman Pelaez' objections to the collection of the Special Fund imposition, namely, that, under section 17, the imposition, manufacture and/or marketing of petroleum products and not the consumers and that the 15-centavo ceiling had been exceeded, are no longer valid. In this connection, it might be useful to note that the section above-quoted requires that the purposes of the Fund be also taken into account and one of these is "the development of energy sources". (1st "whereas" clause, PD 1633) Towards this end, we submit that the Board of Energy should be given wide discretion in fixing the amount of the Special Fund imposition provided it does not exceed the ceiling (P0.30 per liter.) Concerning the specific impositions, the legal authority therefor is Section 153 of the National Internal Revenue Code of 1977 (P.D. No. 1158), as amended by Presidential Decree No. 1672, which reads, insofar as pertinent, to wit: "SEC. 153. Specific tax on manufactured oils and other fuels . On refined and manufactured mineral oils and motor fuels, three shall be collected the following taxes which shall attach to the articles hereunder enumerated as soon as they are in existence as such: "(a) Kerosene, per liter of volume capacity, seven centavos; "(b) Lubricating oils, per liter of volume capacity, eighty centavos; "(c) Naphtha, gasoline and all other similar products of distillation, per liter of volume capacity, ninety-one centavos: Provided, That, on premium and aviation gasoline, the tax shall be one peso per liter of volume capacity : (Emphasis supplied.) "xxx xxx xxx" With respect to the collection of an energy development impost, it is noted that the Board of Energy is "expressly empowered to "regulate and fix the prices of petroleum products" (Sec. 9[a], P.D. No. 1206, as amended by P.D. No. 1573) and to exercise "such other acts as may be necessary and conducive to the exercise of its powers and functions". (Sec. 12[B] [iv], P.D. No. 1206. Considering that one of the objectives for which the Oil Industry Commission was created was "to assure that the country shall have a proper, adequate and continuous supply of crude oil and refined petroleum products" (Sec. 2[a], R.A. 6173), the Board of Energy, as its successor agency, in the exercise of its abovesaid authority, deemed it necessary that an additional impost be executed upon the sale of petroleum products in the country for the continued development of local sources of energy with the end in view not only of assuring the nation of a stable supply, but also of securing the country's gradual independence from imported fuel. Wherefore, the questions raised by Assemblyman Pelaez regarding the legal authority under which the increased fuel taxes are being imposed and collected are answered accordingly insofar as they refer to the augmentations imposed in February 1980. cdrep For the Minister of Justice: (SGD.) JESUS N. BORROMEO Deputy Minister