Malampaya firm asks SC to resolve P53-billion tax case

By Alena Mae S. Flores – September 04, 2018 at 07:55 pm

The Malampaya consortium filed a petition for certiorari with the Supreme Court seeking a review of the Commission on Audit’s findings that the operator owed the government P53 billion in corporate income tax.

“We can confirm that the Malampaya joint venture partners, together with the Department of Energy, filed a petition for certiorari with the Supreme Court after receiving the Commission on Audit’s decision denying the motion for reconsideration submitted by the Malampaya consortium,” Shell Companies in the Philippines, a member of the consortium, said in a statement.

The Malampaya consortium operates service contract 38 or the Malampaya gas project in northwest Palawan, which supplies natural gas to power plants with over 3,000 megawatts of capacity in Batangas.

The consortium is led by Shell Philippines Exploration B.V. as an operator with a 45-percent stake, Chevron Malampaya LLC also with 45 percent and state-run PNOC Exploration Corp. with 10 percent.

The Supreme Court case is separate from the arbitration cases filed by the consortium against the national government with the Singapore International Arbitration  Center in September 2015 and another arbitration case lodged with the International Center for Settlement of Investment Disputes filed in July 2016.

The cases stemmed from the decision of CoA in April 2015, which stated that the income taxes of the service contractors could not be assumed by the national government in its 60-percent share in the Malampaya proceeds. The CoA, thus, ordered the consortium to pay the national government P53.14 billion in taxes.

A source said hearings at the Singapore Arbitration Center were due to begin next week.

Energy Secretary Alfonso Cusi earlier asked CoA to honor the sanctity of contracts of the Malampaya gas project because of its impact on foreign investments in the country.

Cusi sent a letter to CoA stating that “the foremost consideration in the mind of foreign investors in deciding where to invest is the predictability, certainty, and consistency of investment rules and regulatory regime of a country.”

“It is therefore of fundamental importance that we observe the sanctity of contract in our commercial transactions,” he said.

Cusi said the COA decision eroded the country’s investment standing compared to other countries but this could be reversed if “COA reconsiders and reverses its decision.

”Cusi said the “solid legal” foundations of Department of Energy’s position is contained in Presidential Decree 87 and Presidential Decree 1459 and the department “entertains no doubt whatsoever on the legality of our position on this matter.

”Former Energy Undersecretary Jose Layug said the government should look at how to resolve the COA issue especially in the wake for the impending depletion of gas from Malampaya in less than a decade.

Layug said the instability of policies and contracts such as the COA case had affected investor sentiment among oil and gas industry players.