Energy Secretary Alfonso Cusi asked the Commission on Audit to honor the sanctity of the Malampaya natural gas project’s contract in northwest Palawan.
CoA earlier issued a notice of charge to collect around P151 billion from the Malampaya consortium for the period 2002 to end June 2016, arising from the CoA’s tax interpretation that corporate income tax should not form a part of the government’s share in the Malampaya project.
The Energy Department under the previous administration appealed CoA’s findings.
Cusi said in a letter to CoA dated Sept. 19 that the Energy Department was “still adopting the aforementioned motion for recommendation as the official DOE position in the subject controversy.”
Cusi said “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,” the official said.
The energy chief said in a separate comment that he raised the matter to the economic cluster and the Cabinet and “we concurred with the [previous] DOE stand.”
The CoA decision eroded the country’s investment standing compared to other countries, but Cusi said this could be reversed if “CoA reconsiders and reverses its decision.”
The Malampaya consortium is composed of Shell Philippines Exploration B.V., with a 45-percent stake, Chevron Malampaya LLC (45 percent) and PNOC Exploration Corp. (10 percent).
Cusi raised the matter to the Cabinet economic cluster shortly after Spex, operator of the Malampaya gas project, filed a second arbitration case due to the CoA decision.
Cusi said the “solid legal” foundations of DoE’s position was contained in Presidential Decree 87 and Presidential Decree 1459.
Energy Department director for legal division Arthus Tenazas said CoA’s decision “is an undue interference to the powers of the DOE to administer and implement PD 87 and PD 1459.”
Tenazas said CoA “totally overstepped and exceeded the legal bounds of CoA’s constitutionally mandated functions tantamount to a gross abuse of discretion.”
The department said the 60 percent share of the government including income tax was based on following provisions of the law: Section 12 of PD 87 (a) which states that “the contractor is exempt from all taxes except income tax.”
It also has legal basis under Section 18 (b) of PD 87 which states that: “That in no case shall the annual net revenue share of the government, including all taxes paid by or on behalf of the contractor, be less than 60 percent of the difference between the gross income and the sum of the operating expense and Filipino participation incentive.”
Tenazas said the agency’s legal position was also anchored under under PD 1459, Section 1 (a) which “provides that the share of the government including all taxes shall not be less than 60 percent of the difference between the gross income and the sum of the operating expenses and such allowances such as the secretary of Energy may deem proper to grant.”