MANILA: Pilipinas Shell has lost a P5.7-billion tax case filed against it by the Arroyo administration, upsetting a P30-billion initial public offering that the petroleum company plans to launch by next month.
Sitting en banc, the Court of Tax Appeals last week issued two amended decisions, ordering the local Shell to pay P5.7 billion excise and value-added taxes for its catalytic cracked gasoline imports from 2006 to 2009.
Despite the inclusion of a 25 percent surcharge, the court award is considerably less than the P7.348 billion that then District Collector Juan Tan of the Port of Batangas had earlier assessed the petroleum company.
Pilipinas Shell chairman and president Edgar Chua could not be reached for comment — no one was answering the Shell trunkline yesterday morning — but the oil company as late as July believed that its “factual and legal positions are strong.”
Consequently, Shell provisioned only P1.6 billion against the government’s tax claim, reiterating in its first half 2016 financial filing that “the ultimate outcome of these proceedings will not have a material adverse effect on the financial statements.”
Shell reported a P5-billion profit from January to June 2016, after posting P3.6 billion in net income in 2015, P8.5 billion loss in 2014 and another P0.9 billion loss in 2013.
The turnaround would have capped the career of Chua, who is retiring at the end of next month after turning 60. Shell has already picked the next chairman and president, Cesar Romero, another career executive who was vice president for global retail network prior to his elevation.
Aside from the P5.7-billion judgment, Shell is also contesting a P1.99-billion excise tax imposition that the Bureau of Internal Revenue wants to collect from the oil company’s importation of alkylate additives from 2010 to June 2012.
“Estimates of the probable costs for the resolution of these claims, if any, have been developed in consultation with internal and external counsels handling the company’s defense in these matters and are based upon the probability of potential results,” Shell said, referring primarily to law firms Romulo Mabanta and Cruz Marcelo Tenefrancia.
“The company’s management currently believes that the ultimate outcome of these proceedings will not have a material adverse effect on the financial statements.”
Should Shell continue with its planned listing, according to Shell counsel Perry Pe the November target was still on track, the company earlier said it would use a little over P2 billion of the net proceeds of the much-delayed initial public offering for its capital and operational requirements. The company also reported that it had P16 billion in long-term loans as of end-2015.
The heftier P26.5 billion to be raised, by way of secondary offering, would accrue to selling shareholders Shell Overseas Investments BV, The Insular Life Assurance Co., and Spathodea Campanulata Inc., controlled by LBC Express patriarch Carlos Araneta.
And at a target of P90 a share, former First Gentleman Mike Arroyo can also expect over P650 million IPO windfall, thanks to his inherited shares. His distant cousin, Marcos son-in-law Gregorio Araneta III, could look forward to another P100 million added to his liquid assets. But that, as they say, is another story.
