PAL gets tax break on fuel

Philippine Daily Inquirer
October 4, 2011
By Marlon Ramos

The Court of Appeals has prevented the government, using a Department of Energy (DOE) certification issued nine years ago, from imposing an excise tax on aviation fuel imported by troubled Philippine Airlines.
In upholding the decision of a Pasay City regional trial court, the appeals court agreed with PAL’s argument that the Bureau of Internal Revenue (BIR) could not collect excise taxes from its imported Jet A-1 fuel by invoking a DOE order issued on Dec. 20, 2002.

The DOE certification, which was requested by the Department of Finance (DOF), states that the aviation gas, fuel and oil needed by domestic airlines were locally available.

Under its charter, the flag carrier was exempted from paying excise tax if the aviation fuel could not be obtained locally “in the reasonable quality, quantity or price” and that its importation would be used exclusively for its operations.

“Clearly, the questioned certification is not in the nature of taxes, in the sense of being the lifeblood of the national economy, such that its enforcement cannot be enjoined,” the court said in a 22-page ruling.
“Thus, suspending the collection of excise taxes on PAL’s importation of aviation fuel will not cripple the government and enjoining the reliance on the DOE certification would not necessarily drain the national coffers,” it added.

Associate Justice Franchito Diamante penned the ruling, with Associate Justices Josefina Guevara-Salonga and Ramon Garcia giving concurring opinions.

In its petition, PAL said it was not questioning the authority of the BIR to impose an excise tax on imported fuel as long as it did not invoke the DOE certification.

It said its importation of aviation fuel had been approved by the Civil Aviation Authority of the Philippines.