In response to Petron Corp.’s claim that the increase in fuel excise taxes under the Tax Reform for Acceleration and Inclusion (TRAIN) law led to a decline in Petron’s earnings for the first half of 2019, Department of Finance (DOF) Undersecretary and Chief Economist Gil Beltran said that this was a “highly unlikely” scenario presented by the petroleum company, given the improved income performance reported during the same period by its rivals like Pilipinas Shell Corp.
Oil refiner Petron released a statement on Aug. 8 declaring that its net income in the first half of 2019 dropped significantly by 72 percent versus the same period last year.
Petron claimed that price increases resulting from the TRAIN’s implementation led to a decrease in its domestic fuel sales.
“We looked at their financials and it seems highly unlikely. It is misleading for Petron to blame TRAIN for their decrease in sales,” Beltran said. He added that the DOF looked at recently released reports from other major players, including Pilipinas Shell Petroleum Corporation (Shell), which also has a refinery.
“Shell actually reported that despite lower profits in the first half of 2019 compared to the same period in 2018, they saw higher retail volume growth across all business segments in the second quarter, which is the opposite of the Petron story,” Beltran said.
“In addition, Petron’s message that higher prices led to a decline in sales is inconsistent with their history,” he said.
The DOF found that, despite the peak of gasoline and diesel retail prices during the first quarter of 2012, Petron revenues still increased by 17 percent or PHP 10.6 billion compared to the previous year. In the first half of 2012, when the oil price was highest, Petron’s income grew by 43 percent.
“Perhaps Petron should look inward to understand the true cause,” Beltran said.
Petron had also reported that their indirect expenses grew by 78 percent in the first quarter of 2019, which suggests lower efficiency resulting in the income decrease.
“Blaming TRAIN for their income drop is unwarranted. Taking into account much higher indirect expenses, it appears the reason for Petron’s performance can be attributed to internal issues or perhaps weakening market share because they refuse to adjust their prices, and not higher excise tax. Remember, Shell is in the same business and their sales volumes actually grew,” the official explained.
TRAIN implemented a gradual increase of oil excise taxes by up to PHP 6 per liter over a period of three years, with lower rates for “essential products” such as diesel, kerosene, and LPG.
The government has also been implementing social mitigating measures such as the Unconditional Cash Transfer (UCT) and the Pantawid Pasada Programs, to help offset the impact of higher oil excise taxes on lower-income households and qualified franchise holders of public utility jeepneys (PUJs).
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