Possible tax leaks warned as demand for biofuel rises

By Riza Lozada

The Department of Energy (DOE) has sounded off the alarm on possible tax leaks in the importation of ethanol, with the demand for gasoline blended with biofuels increasing to its current level of 400 million tons.

An industry source told The Market Monitor (TMM) that local distilleries were branching out to ethanol fuel processing to cash in on the huge demand for bioethanol.
Currently, E10 which means ethanol at 10 percent blended with gasoline  for cleaner fuel distributed in all retail gas stations is being followed by oil companies to comply with the National Biofuels law.

In an interview with TMM, Energy Undersecretary Zenaida Monsada expressed confidence that Internal Revenue Commissioner, Kim Henares was strictly monitoring compliance on excise taxes for ethanol.

But the lack of manpower to implement the onsite inspection of releasing bioethanol was identified to be one hindrance to effectively collect excise tax.

Monsada said that ethanol imports intended for biofuels blending are zero-rate tax compared with other ethanol used for non-biofuels program which have high excise taxes.
She said that more participants to the local production of bioethanol were expected as the economy experienced growth.

Food giant Universal Robina Corporation (URC) was recently registered as renewable energy company with plans to put up cogeneration power plants and producer of biomass ethanol. It will be inaugurating its sugar-based bioethanol plant.

The Philippines is promoting investments in bioethanol to meet its deficiency of about 70 percent in demand for the mandated E10 gasoline.

Among the investment facilitation initiated recently, according to Monsada, was the partnership of the DOE with the United States Agency for International Aid (Usaid) implementing the transparency and accountability portal website that would reduce by 80 percent the permitting process of renewable energy projects, which included the bioethanol classified as biomass source for cleaner fuels.

Monsada said the local sugar industry would continue to provide the feedstock for ethanol because sugarcane remained the lowest in cost.  In Thailand and in the US, the feedstocks used were cassava and corn, respectively.

At present, less than 30 percent of ethanol requirement is being supplied by the local producers.
Monsada said that with insufficient supply of locally produced ethanol, the country had been importing ethanol to meet the 70-percent demand to be able to comply with the mandated E10 gasoline in all oil retail gasoline stations.

She confirmed that the local sugar industry supplied 30 percent of the ethanol requirements. And because of the lack for ethanol supplies, some of the local distilleries were adding units so that production of alcohol for intended drinking or other uses they could now process into fuel quality to add up to ethanol supply.

Monsada said the distilleries were not prevented under existing laws to engage in the production of ethanol. But the DOE and other agencies are strictly monitoring their importation to comply with the tax payment obligations.

The renewable energy law on biomass requires that the local production of bio ethanol will supply the requirement on cleaner fuels like gasoline and the DOE is monitoring this sector according to Monsada.