Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

3676

HOUSE BILL No:

Introduced by Reps. CARLOS ISAGANI T. ZARATE, EMMI A. DE JESUS,
ANTONIO L. TINIO, ARLENE D. BROSAS, FRANCE L. CASTRO
ARIEL B, CASILAO, and SARAH JANE I. ELAGO.

AN ACT
REGULATING THE DOWNSTREAM PETROLEUM INDUSTRY AND FOR
OTHER RELATED PURPOSES

'XPLANATORY NOTE

The relentless oil price increases in the country even when worldwide oil prices are going
down is not only a real cause for alarm but even an indictment of the effects of the neoliberal
system and the deregulation of the country’s oil industry. Add to this the undeniable fact that
oil prices are also high because of the control and influence of giant transnational oil
corporations on the global oil industry.

‘The big transnational oil companies: Exxon-Mobil, Royal Dutch Shell, Chevron-Texaco (of
which marketing arm is Caltex), British Petroleum (BP), and CFP-Total have almost
complete control over the oil prices they collusively set worldwide. Even if the largest oil
producing countries (Saudi Arabia, Iran, Venezuela, Mexico, and China) control 90 percent
of the world’s oil reserves, the five transnational oil companies can dictate world prices
because they control 60 percent of oil production and hold all levels of the market through
their vast global network of exploration and exploitation sites, partnerships with nationalized
oil companies, refineries, pipelines, tankers, and stations.

‘The Big Three (or the local subsidiaries of Shell and Caltex plus Petron), claim that they do
not overprice, that they set prices based on the price increases of Dubai oil exchanged in the
spot market and on Peso-Dollar exchange rate fluctuations, Moreover, they deny the
existence of a cartel, alleging that they merely and coincidentally follow the movements of
world oil prices. They claim these even as they are minimally affected by prices in world
markets and even as they are able to trade in the same currency between subsidiaries.

Oil companies operating in the Philippines have raised pump prices 14 times as of July 1,
2013. Recently, escalating world oil prices have prompted oil firms operating in the
Philippines to hike pump prices of gasoline and diesel for seven straight weeks ~ from May 3
to June 25, 2013. Overall, local pump prices were raised 14 times so far this year, bringing
unleaded gasoline prices to between P47.75 to 55 a liter and diesel to between P38.70 to


42.05 a liter. Liquefied petroleum gas (LPG) is priced between P619,00-743.00 per I1-
Kilogram tank.

Up to 95 percent of the country’s petroleum requirements are imported, rendering the country
exceedingly vulnerable to the dictates of big transnational corporations. ‘The worst
implication of this is that our severe dependence on such corporations, which control not only
the importation, refining, and retailing of crude and petroleum products from abroad, but also
control the exploration, exploitation, refining, retailing, and even re-exportation of our
country’s indigenous petroleum and petroleum-based products, deprives us the opportunity to
be self-sufficient and earn from the development of our own oil industry.

Even without factoring in the increases in the world demand for oil and the artificial effects
of speculation, world oil prices are unreasonably and unjustifiably high because they are
under the control of monopolistic transnational oil corporations. Given this set-up,
government regulation is warranted since the State has a responsibility to promote social
justice and an equitable national economy and patrimony.

Republic Act No. 8479, or the “Downstream Oil Industry Deregulation Act of 1998” holds
the wrong premise that the world pricing of petroleum and petroleum products is fair and
justifiable. Hence, this deregulation Act merely advocates fair pricing through the
“mediation” between big oil companies (refiners and importers) and relatively small dealers,
haulers, and LPG distributors; the opening of the market to new industry participants
nonetheless dependent on big transnational oil corporations; and the relatively insignificant
financial and operational support for small-scale gasoline station retailers.

From the very beginning, R.A. 8479 was bound to fail in implementing fair prices sin
ignored monopoly-pricing practices and cartel behavior by the giant transnational oil
corporations. Worse, deregulation had given transnational oil corporations even more room to
manipulate prices through automatic oil price hikes (OPH); less transparency in pricing,
profits, and operations; and virtually no accountability to the consuming public.

Deregulation has allowed oil price increases to go unchecked, With petroleum as a sensitive
commodity, because price directly affects the cost of almost all other commodities and
services, including essentials such as food, housing, social services, as well as transportation,
deregulation has given transnational oil corporations even more leeway to influence the
country’s cost of living, livelihoods, business and commerce, employment, and the National
Budget.

There is a pressing need to regulate the oil industry to protect the majority of Filipinos from
current runaway increases in oil prices, Regulation can only be effective and truly beneficial
if itis part of a program to institutionalize national oil industrialization, so that local oil prices
can be brought down from unreasonable and unjustifiable levels set by giant transnational oil
corporations and can be prevented from falling prey to further monopoly pricing and
manipulation.

This Bill therefore requires the regulation of the petroleum industry through the creation of a
petroleum regulatory council and a buffer fund which shall instead solely serve to cushion the
impact on consumers against drastic increases in petroleum prices — unlike the Oil Price
Stabilization Fund (OPSF) that reimbursed oil companies for “cost under-recoveries.”


This measure was first filed in the 15" Congress by Bayan Muna Rep. Teddy Casino as HB

4355 and was refiled in the 16" Congress by the Makabayan bloc led by Bayan Muna Rep.
Neri Colmenares as HB 173.

Immediate approval of this Bill is earnestly sought in the 16"" Congress,

Approved,

Bayan Mura Party-list

wis : Mees los)
. ANTONIO LTINIO

Rep. EMMI A. PE JESUS.
ACT Teacl Party-list Gabriela Women's Party

Yl, yp~
RLENE D, BROSAS
Gabrivla Women's Party

Re

Le HK
a
Rep. ABEL B. CASILAO Rep. SARAH/JANE I. ELAGO
Anakpawis Party-list (Kabgtaan Party-tist



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

3676

HOUSE BILL No.

Introduced by Reps. CARLOS ISAGANI T. ZARATE, EMMI A. DE JESUS,
ANTONIO L. TINIO, ARLENE D. BROSAS, FRANCE L. CASTRO
ARIEL B, CASILAO, and SARAH JANE I. ELAGO.

AN ACT
NG THE DOWNSTREAM PETROLEUM INDUSTRY AND FOR
OTHER RELATED PURPOSES

REGULAT!

Be it enacted by the Senate and the House of Representatives of the Philippines in Cong
assembled:

SECTION 1. Short Tith
Regulation Act of 2016.”

This Act shall be known as the “Downstream Oil Industry

ION 2. Declaration of Policy. - It is enshrined in the Philippine Constitution that “the
all promote social justice in all phases of national development” (Article II, Section
X) and “shall pursue a trade policy that serves the general welfare and utilizes all forms and
arrangements of exchange on the basis of equality and reciprocity” (Article XII, Section
XII),

State

Moreover, the Constitution also mandates “the State shall regulate or prohibit monopolies
when the public interest so requires. No combinations in restraint of trade or un
competition shall be allowed” (Article XII, Section XIV).

Consistent with the foregoing, crude oil and socially and economically sensitive refined
petroleum or petroleum products, being vital to national security and their supply at
reasonable prices being essential to the general welfare, it is hereby declared to be the policy
of the State that the business of importing, exporting, re-exporting, marketing, distributing,
and selling both at wholesale and retail of such products, as well as operations and activities
of natural and juridical persons, firms, and entities engaged in such activities, shall be carried
out in a manner consistent with the public interest. This policy aims to attain the following
objectives and purposes:

(a) To assure that locally refined and processed petroleum products, as well as imported
crude oil and processed petroleum, shall be primarily for the benefit of the general welfare:
and


(b) _ To assure the public of reasonable prices for petroleum products and to prevent
collusive practices in the industry, particularly as to prices.

SECTION 3. Coverage. - This Act shall apply to all natural and juridical persons, firms, and
entities engaged in the business of importing, exporting, re-exporting, marketing, distributing,
and selling both at wholesale and retail crude oil and socially and economically sensitive
petroleum products for their own use or for the use of other natural and juridical persons,
firms, and entities engaged in any and all activities of the petroleum industry.

SECTION 4. Definition of Terms.

(a) “Council” shall mean the Petroleum Regulatory Council (PRC).
(b) “Fund” shall mean the Oil Price Buffer Fund (OPBF).

(c) “Petroleum” shall refer to the naturally occurring mixture of compounds of hydrogen
and carbon with a small proportion of impurities and shall include any mineral oil, petroleam
gas, hydrogen gas, bitumen, asphalt, mineral wax, and all other similar or naturally-
associated substances, with the exception of coal, peat, bituminous shale and/or other
stratified mineral fuel deposits,

(d) “Crude oil” or “oil” shall be used interchangeably with “petroleum.”

(©) “Socially and economically sensitive petroleum products” shall refer to liquefied
petroleum gas (LPG), naphtha, gasolines, kerosenes, automatic/industrial diesel oils, and
industrial/residual fuel oils.

SECTION 5. Creation of the Petroleum Regulatory Council. - There is hereby created an
independent, quasi-judicial regulatory body to be named the Petroleum Regulatory Council
(PRC), hereafter referred to as the Council.

The Council shall be composed of a Chairperson and six (6) Members to be appointed by the
President of the Philippines. The Chairperson and the Council Members shall be natural-born
citizens and residents of the Philippines; persons of good moral character; at least thirty-five
(35) years of age; of recognized competence in any of the following fields: energy, law,
economics, finance, commerce and industry, and management; or the transportation and
consumer sectors; and with at least five (5) years of actual and distinguished experience in
their respective fields of expertise or sectors: Provided, That out of the six (6) members of the
Council, at least one (1) shall have had (10) years experience in the fields of management,
economics, or commerce and industry; one (1) shall be a certified public accountant with at
least ten (10) years experience in active practice; and one (1) shall be a sector leader who has
been active for at least ten (10) years in the transportation, consumer, or industrial sector,

‘The term of office of the Chairperson and the Council Members shall be four (4) yeat
Provided, That for the first appointees, the Chairperson shall hold office for four (4) years,
two (2) Members shall hold office for four (4) years, another two for three (3) years, and the
remaining two (2) Members shall hold office for two (2) years: Providedfurther, That for
subsequent appointees, the successor of each Member shall have the same tenure as his
predecessor: Provided further, That appointment to any vacancy shall only be for the


unexpired term of the predecessor: Provided finally, That in no case shall any member serve
for more than four (4) years in the Council.

Within three (3) months from the creation of the Couneil, the Chairperson shall submit for the
approval by the President of the Philippines the new organization structure and plantilla
positions necessary to carry out the powers and functions of the Council

‘The Chairperson and Members of the Council shall assume office upon their appointment and
the administration of their respective oaths of office.

The Chairperson and the other members of the Council shall not be exempt from
administrative cases. A preventively suspended Chairperson shall be temporarily replaced by
the most senior, in terms of tenure, of the six (6) Members. The preventive suspension of the
Chairman shall not toll the running of his/her term of office. In case of the Chairman's
removal from office prior to the expiration of his/her term of office, the President shall
appoint a new Chairman who shall serve only for the unexpired portion of the removed
Chairman’s term of office.

No person who, within four (4) years immediately prior to his appointment, has worked or is
working in any firm engaged in the petroleum industry or any other entity whose main
business is directly or indirectly related to any such firm shall be appointed to the Council.
The Chairperson and Members of the Council shall be prohibited from holding any interest
whatsoever, either as investor, stockholder, officer, or director, in any company or entity
engaged in the business of exploring, exploiting, importing, exporting, re-exporting, shipping,
transporting, processing, refining, storing, marketing, distributing, and selling both at
wholesale and retail any petroleum resource, In case they do, they must divest through sale or
legal disposition of any and all interest in the petroleum industry upon assumption of office.

The presence of at least four (4) members of the Council shall constitute a quorum and the
vote of three (3) members in a meeting where there a quorum is present shall be necessary for
the adoption of any rules, ruling, order, resolution, decision, or other act of the Council in the

exercise of its quasi-judicial functions,

Former Chairpersons and members of the Council are prohibited from working directly or
indirectly in any firm engaged in the petroleum industry or any other entity whose main
business is directly or indirectly related to any such firm within one (1) year from the time
they have ceased to be officially connected with the Council.

The Chairperson and the Council Members shall devote their full time to the Council and
shall not accept any other employment while in office.

SECTION 6. Compensation and Other Emoluments for the Council. - The compensation
and other emoluments for the Chairperson, Members, staff, and personnel of the Council
shall be covered by Republic Act No. 6758, otherwise known as the "Salary Standardization
Act".

The Chairperson of the Council shall be entitled to the same salaries, allowances, and benefits
equal to those of a Department Secretary while the Council Members shall receive the same
equal to those of a Department Undersecretary. The Chairperson and the other members of
the Couneil shall, upon completion of their term or upon becoming eligible for retirement


under existing laws, be entitled to the same retirement benefits and the privileges provided
for Department Secretaries and Department Undersecretaries, respectively

SECTION 7. Functions, Powers, and Duties of the Council Upon Notice and Hearing. -
At the effectivity of this act, industry averages of prevailing market prices of socially and
economically sensitive petroleum and petroleum products shall be the first set of prices, Any
succeeding modification shall hereby be required to undergo public hearings, convened by
the Council, before such become effective.

The Council shall revise oil prices only upon proper notice and hearing, in the exercise of its
powers and functions, as follows

(a) Inrevising prices, the Council shall be guided by the following considerations:

(al) Whether claimed increases or decreases in costs, sales, or profits are real or

simulated;

(a2) Whether expenses and costs which are claimed to have been incurred, or are
being incurred, or are to be incurred are reasonable;

(a3) The impact of the proposed prices or change therein on the economy and on
the consuming public, particularly low income groups and industries essential to the
national welfare or security, given the daily cost of living and predominant wages;

(a4) ‘The component costs and the profit levels or rates of return not only of the
petroleum industry but also of other manufacturing industries in the country; and

(a5) __ The ability of the levels of the Oil Price Buffer Fund to maintain, through
subsidy disbursements, current oil price levels until the next resetting,

(b) Hearings must have in attendance organizations from different sectors affected by the
following regulations, including but not limited to consumer groups, the transport sector,
other representative people's organizations, producers, and sellers, as well as independent
expert

Advance details of these public hearings, as well as for hearings required by Section 7 of this
Act, shall be published in at least two (2) newspapers of major circulation at least two (2)
weeks before the scheduled consultations.

(©) _ Inexercise of its duties, the Couneil shall, for every hearing convened:
(cl) _ Present a concise report on the operations regarding the administration of the
Oil Price Buffer Fund, including its complete sources and disbursements, since the
last hearing or oil price adjustment;

(2) Summarize data justifying and supporting the last oil price adjustments and
how these have changed and contributed to the necessity to revise oil prices; and

(3) _ Publish the proceedings of concluded hearings in at least two (2) newspapers
of national circulation at least one month before the implementation of newly set oil


prices, for which period the Council shall be open to petitions ad appeals subject for
review by the Council,

SECTION 8. Petitions for Hearings. - Local oil subsidiaries, wholesalers, and retailers are
hereby required to file a petition with the Council every time they intend to implement oil
price hikes. People’s organizations, non-government organizations, and citizens may as well
file petitions with the Council proposing to decrease oil prices.

SECTION 9. General Jurisdiction, Powers, Functions, and Duties of the Council, - The
Council shall strictly regulate the pricing of crude oil and socially and economically sensitive
petroleum products at the levels of marketing, distribution, wholesale, and retail in'the
operations and activities of natural and juridical persons, firms, and entities engaged in such
activities,

For this purpose, the general jurisdiction, powers, functions, and duties of the Council shall
include the following:

(a) _ Price monitoring and compilation of the prices involved in the movement of raw
materials or finished produets in the marketing, distribution, and sale both at wholesale and
retail, of petroleum and socially and economically sensitive petroleum-based resources, In
order that no unnecessary costs may be included in the pricing of petroleum and its
derivatives, price monitoring and compilation shall also be done at the stages of shipment,
transport, and storage. This shall be conducted in coordination with existing, independent
monitoring bodies, These records shall be submitted weekly, or upon request, for the review
of the Council. For cases where persons, firms, or entities refuse such information, the
Couneil shall issue subpoenas and subpoenas duces tecum to compel such parties;

(b) Compilation and analysis of information hereby required from local importers of
crude oil and socially and economically refined petroleum products, refiners, dealers, and
petroleum marketing companies on the following:

(b1) Comprehensive sales reports;

(62) Inventories;
(3) Prices of all involved products at various time intervals, as determined by the
Council for petroleum and petroleum products; and

(b4) Demand forecasts for subsequent time intervals, as determined by the Council
for involved petroleum and petroleum products.

(©) ‘The Council shall pursue systematized, random statistical sampling surveys to
determine adherence to and violations of price regulation by the Council. These surveys shall
be done by technical groups formed by the Council, in close coordination with Couneil-
accredited organizations that undertake their own petroleum price surveys;

(d)__Issue subpoena and subpoena duces tecum in any inquiry, study, hearing,
investigation, or proceedings which it may decide to undertake in the exercise of its powers,
functions, and duties under this Act; and


(©) Promulgate rules and regulations relevant to procedures governing hearings before it
and enforce compliance, through the imposition of penalties, with any rule, ruling, regulation,
order, resolution, decision, or other requirements of this Act or acts of the Council in the
exercise of its quasi-judicial functions; Provided, That said rules and regulations take effect
fifteen (15) days after publication in the Official Gazette.

SECTION 10. Council Staff. - The Chairperson and the Members of the Council shall
appoint and maintain their adequate officers, staff, and personnel, including technical boards,
to be maintained according to the functions, powers, and duties of the Council.

SECTION 11. Budget of the Petroleum Regulatory Council. - The amount of one hundred
fifly million pesos (PhP150,000,000,00) is hereby allocated from the General Fund not
otherwise appropriated for the initial operations of the Petroleum Regulatory Council
Thereafter, the annual budget of the Council shall be included in the regular or special
appropriations under the General Appropriations.

SECTION 12, Procedures of the Council. - All inquiries, studies, hearings, investigations,
and proceedings conducted by the Council shall be governed by rules adopted by the Council,
and in the conduct thereof the Council shall not be bound by the technical rules of evidence:
Provided, That the Council may summarily punish for contempt by a fine not exceeding five
thousand pesos or by imprisonment not exceeding thirty (30) days or both, any person guilty
of such misconduct in the presence of the Council or so near thereto as to seriously interrupt
any hearing or session or any proceedings before it, including cases in which a person
willfully fails or refuses, without just cause, to comply with summons, subpoena ad
testificandum, subpoena duces tecum, decision or order, rules and regulations legally issued
or promulgated by the Council; or being present at a hearing, session, or inves
refuses to be sworn as a witness or to answer questions when lawfully required to do so, or to
furnish information required by the Council. ‘The sheriff and other police agencies of the
place where the hearing or investigation is conducted shall, upon request of the Council,
assist it to enforce the provisions of this Section.

The Council may, in any inquiry, study, hearing, investigation, or proceeding, by order in
writing, cause the deposition of witnesses within or without the Philippines to be taken in the
manner prescribed by the Rules of Court.

SECTION 13. Creation of the Oil Price Buffer Fund, - There is hereby created a trust fund
directly under the custody and administration of the Petroleum Regulatory Council as an
account booked under its liabilities. The trust fund shall be designated as the Oil Price Buffer
Fund (OPBF), hereon referred to as the Fund, for the strict and unique purpose of cushioning
consumers against the frequent and drastic price increases of local petroleum and petroleum
products.

SECTION 14. Disbursement of the Fund. - ‘The Fund shall solely and strictly release
disbursements to subsidize local market oil price fluctuations between price resettings, as
settled at hearings conducted by the Council under Section 7 of this Act. The Fund shall
disburse as subsidies, initially on the first year upon the effectivity of this Act, 2.5% of
cumulative increases in market prices across all socially and economically sensitive
petroleum and petroleum products, between public hearings, which decide on the
modification of previously set prices. Revised amounts shall become the new basis for Fund

9


disbursements. When world oil prices decrease, the Council shall retain its existing prices,
acerue all differences in set prices and market prices to the Fund, and maintain current prices
until the next hearing modifies such. Modifications of this subsidy percentage shall likewise
undergo public hearings before approval, and shall mainly depend on the needs of consumers
and industries and on the present levels of the Fund.

The Oil Price Buffer Fund shall be strictly prohibited from being disbursed for the following
purposes:

(@) To reimburse persons, firms, and entities engaged in the petroleum industry for cost
increases on crude oil and imported petroleum products resulting from exchange rate
adjustment and/or increases in world market prices of crude oil;

(b)  “underrecoveries” incurred by persons, firms, and entities engaged in the
petroleum industry as a result of fuel oil sales to the National Power Corporation (NPC);

(©) Projects relating to the consumption or use of crude oil, gas, and other petroleum
products;

(4) For the development of other sources of energy;
(©) For exploration and researches on conservation, anti-pollution, and other similar

studies to subsidize importation of crude oil and refined petroleum products by government
agencies, or government-owned or controlled corporations (GOCCs); and

(f) For any such purpose other than cushioning consumers against the high prices of local
petroleum and petroleum products.

‘The President of the Philippines is hereby prohibited from sourcing from the Oil Price Buffer
Fund, through Executive Order, any projects, programs, and other activities whatsoever.

SECTION 16, Fund Investments, - The Petroleum Regulatory Council may, after the fi
five years of the existence of the Fund, invest part of the proceeds from the Pund in secure
bank deposits like regular savings accounts, current accounts, and time deposits: Provided,
‘That these deposits are insured for the maximum insurable amounts in the banking industry:
Provided further, That the Chairperson and all the Members of the Council are informed and
approve of each and every Fund investment, in specific amounts: Provided further, That
proceeds from the Fund may only be invested when the size of the Fund has reached a
minimum amount wherein it is ten (10) times the average disbursement for the preceding five
years: Provided finally, That all earnings from such placements shall strictly and solely
redound to the Fund

SECTION 17. Sources of the Oil Price Buffer Fund. - The Fund shall be sourced from the
following:

iL Excise Taxes on Petroleum-based Manufactured Oils and Other Fuels

The Oil Price Buffer Fund shall be allocated twenty-five percent (25%) of the proceeds of
excise taxes on covered petroleum-based manufactured oils and other fuels.


Section 148 of Republic Act No. 8424, otherwise known as Tax Reform Act of 1997, as
amended by Republic Act No. 9337, is hereby amended to read:

“SEC. 148. Manufactured Oils and Other Fuels. — There shall be collected on refined and
manufactured mineral oils and motor fuels, the following excise taxes which shall attach to
the goods hereunder enumerated as soon as they are in existence as such:

“(a) XXXX;
“(b) XXXX;
“(c) XXXX;
“(d) XXXX;

“(c) Naphtha, regular gasoline and other similar products of distillation, per liter of volume
capacity, Four pesos and thirty-five (P4.35): [Provided, however, That naphtha, when used as
a raw material in the production of petrochemical products or as replacement fuel for natural-
gas-fired-combined cycle power plant, in lieu of locally-extracted natural gas during the non-
availability thereof, subject to the rules and regulations to be promulgated by the Secretary of
Energy, in consultation with the Secretary of Finance, per liter of volume capacity, Zero
(P0.00):] Provided, [further,] That the by-product including fuel oil, diesel fuel, kerosene,
pyrolysis gasoline, liquefied petroleum gases and similar oils having more or less the same
generating power, which are produced in the processing of naphtha into petrochemical
products shall be subject to the applicable excise tax specified in this Section, except when
such by-products are transferred to any of the local oil refineries through sale, barter ot
exchange, for the purpose of further processing or blending into finished products which are
subject to excise tax under this Section; : PROVIDED FURTHER, THAT OF TOTAL
EXCISE TAXES COLLECTED ON NAPHTHA, REGULAR GASOLINE, AND OTHER
SIMILAR PRODUCTS OF DISTILLATION, TWENTY-FIVE PERCENT (25%) SHALL.
ACCRUE DIRECTLY TO THE OIL PRICE BUFFER FUND:

“(H) Leaded premium gasoline, per liter of volume capacity, Five pesos and thirty-five
centavos (PS.35); unleaded premium gasoline, per liter of volume capacity, Four pesos and
thirty-five centavos (P4.35): PROVIDED, THAT OF TOTAL EXCISE TAXI
COLLECTED ON LEADED PREMIUM GASOLINE, TWENTY-FIVE PERCENT (25%)
SHALL ACCRUE DIRECTLY TO THE OIL PRICE BUFFER FUND;

“(g) XXXX;
“(h) XXXX;

“(i) XXXX;

“() XXXX;
“(k) XXXX; and
“() XXXX.”


HL Value-Added Taxes on the Sale of Petroleum and Petroleum Products

‘The Oil Price Buffer Fund shall be allocated twenty-five percent (25%) of the proceeds of
value-added taxes on petroleum-based manufactured oils and other fuels.

Section 106 of Republic Act No. 8424, otherwise known as Tax Reform Act of 1997, as
amended by Republic Act No, 9337, is hereby amended to read:

“SEC. 106. Value-Added Tax on Sale of Goods or Properties. —
“(A) XXXX:

i) XXXX; or
“(ii) XXXX.

(1) XXXX,
“(a) XXXX;
“(b) XXXX;
“() XXXX:
“(@ XXXX; and
“(@) XXXX;

“The term “gross selling price” means the total amount of money or its equivalent which the
purchaser pays or is obligated to pay to the seller in consideration of the sale, barter or
exchange of the goods or properties, excluding the value-added tax. The excise tax, if'any, on
such goods or properties shall form part of the gross selling price.

THAT OF THE TOTAL VALUE-ADDED TAXES COLLEt
'D PETROLEUM GAS (LPG), NAPHTHA, GASOLINES, KEI
AUTOMATIC/INDUSTRIAL DI
OILS, TWENTY-FIVE PERC!
PRICE BUFFER FUND;

L OILS, AND INDUSTRIAL/RES
25%) SHALL ACCRUE DIRECTLY TO THE olL

“() XXXX:

“(a) XXXX:
“(1) XXXX;
“(2) XXXX;
“(3) XXX
“() XXXX; and

“(5) XXXX.

(6) The sale of goods, supplies, AND equipment [and fuel] to persons engaged in
international shipping or international air transport operations: PROVIDED, THAT THE
TERM “GOODS” DOES NOT INCLUDE PETROLEUM AND PETROLEUM PRODUCTS
AND BY-PRODUCTS.

PROVIDED, THAT OF THE TOTAL VALUE-ADDED TAXES COLLECTED ON
LIQUEFIED PETROLEUM GAS (LPG), NAPHTHA, GASOLINES, KEROSENES,


AUTOMATIC/INDUSTRIAL DIESEL OILS, AND INDUSTRIAL/RESIDUAL FUEL
, TWENTY-FIVE PERCENT (25%) SHALL ACCRUE DIRE
PRICE BUFFER FUND;

“(b) XXXX.
“() XXXX.

PROVIDED, THAT OF THE TOTAL VALUE-ADDED TAXES COLLECT! »
LIQUEFIED PETROLEUM GAS (LPG), NAPHTHA, GASOLINES, KEROSENES,
AUTOMATIC/INDUSTRIAL DIESEL OILS, AND INDUSTRIAL/RESIDUAL FUEL
OILS, TWENTY-FIVE PERCENT (25%) SHALL ACCRUE DIRECTLY TO THE OIL.
PRICE BUFFER FUND,

“(B) XXXX:
(1) XXXX;
“(2) XXXX:
“(a) XXXX; or
“(b) XXXX;
(3) XXXX; and
“(4) XXXX,

“(c) XXXX,”

MW. Value-Added Taxes on the Sale of Services Directly Involving Petroleum and
Petroleum Products

ion 108 of Republic Act No. 8424, otherwise known as Tax Reform Act of 1997, as
amended by Republic Act No, 9337, is hereby amended to read:

>. 108, Value-added Tax on Sale of Services and Use or Lease of Properties. -
“(A) XXXX:

“(i) XXXX; or
“(il) XXXX.

“The phrase “sale or exchange of services” means the performance of all kinds or services in
the Philippines for others for a fee, remuneration or consideration, including those performed
or rendered by construction and service contractors; stock, real estate, commercial, customs
and immigration brokers; lessors of property, whether personal or real; warchousing services;
lessors or distributors of cinematographic films; persons engaged in milling processing,
manufacturing or repacking goods for others; proprietors, operators or keepers of hotels,
motels, resthouses, pension houses, inns, resorts; proprietors or operators of restaurants,
refreshment parlors, cafes and other eating places, including clubs and caterers; dealers in
securities; lending investors; transportation contractors on their transport of goods or cargoes,
including persons who transport goods or cargoes for hire another domestic common carriers
by land, air and water relative to their transport of goods or cargoes; common carriers by air
and sea relative to their transport of passengers, goods or cargoes from one place in the
Philippines to another place in the Philippines; sales of electricity by generation companies,



transmission, and distribution companies; services of franchise grantees of telephone and
telegraph, radio and television broadcasting and all other franchise grantees except those
under Section 119 of this Code; services of banks, non-bank financial intermediaries and
finance companies; and non-life insurance companies (except their crop insurances),
including surety, fidelity, indemnity and bonding companies; and similar services regardless
of whether or not the performance thereof calls for the exercise or use of the physical or
mental faculties: PROVIDED, THAT OF THE TOTAL VALUE-ADDED TAXES
COLLECTED ON LIQUEFIED PETROLEUM GA‘ (LPG), NAPHTHA, GASOLINES,
KEROSENES, AUTOMATIC/INDUSTRIAL DIESEL OILS, AND

INDUSTRIAL/I IDUAL FUEL OILS, TWENTY-FIVE PERCENT (25%) SHALL
ACCRUE DI TLY TO THE OIL PRICE BUFFER FUND;

“The phrase ‘sale or exchange of services’ shall likewise include:
“(1) XXXX;

(2) XXXX;

(3) XXXX;

“(4) XXXX;

“(5) XXXX.

“(6) XXXX;

“(7) XXXX; and

(8) XXXX,

“XXXX,

“(2) XXXX;
(3) XXXX;
“(4) XXXX;
(5) XXXX;
“() XXXX; and
“(7) XXXX,

“() XXX.”
IV. Increases in Taxes on Petroleum and Petroleum Products

Of any authorized increases in the tax collection from ad-valorem tax, excise tax, or customs
duty imposed on petroleum and petroleum products, through Executive Orders of the

President or through subsequent Congressional legislation, twenty-five percent (25%) shall
hereby directly accrue to the Oil Price Buffer Fund under the Petroleum Regulatory Council

Vv. Extraordinary Gains

Whenever an authorized increase in the prices of petroleum produets will result in an
extraordinary gain from existing inventories, the Council is hereby empowered to take
measures, including the payment in the full amount of the extraordinary gain by the persons,
firms, or entities benefited to the Oil Price Buffer Fund.



VI. Proceeds collected from the penalties for violations, as stated under Section 19 of
this Act.

SECTION 18. Annual Reports of the Council. - The Council shall publish an annual
report, with or without the convening of hearings, on the administration of the Oil Price
Buffer Fund, including its complete sources and disbursements; data that justify and support
any and all adjustments in petroleum prices in the past year; information on the general state
and prospects of the local downstream petroleum industry; and other such vital information
derived from inquiries, studies, and investigations by the Council in the exercise of its
powers, functions, and duties.

SECTION 19, Penalties for Violations.

(a) Any person who gives false or misleading data or information or willfully or through
gross negligence, conceals or falsifies a material fact, in any investigation, inquiry, study, or
other proceeding held pursuant to this Act, shall be punished with imprisonment of not less
than two but not more than six months, and with a fine of not less than one thousand but not
more than ten thousand pesos: Provided, however, That if the false or misleading data or
information shall have been given under oath, the maximum penalty for giving false
testimony or perjury shall be imposed;

(b) Any person who violates any provision of this Act or any order, decision, ruling, or
regulation of the Council shall, upon conviction, be sentenced for a period of not less than six
months but not more than five years and a fine of not less than ten thousand pesos but not
more than fifty thousand pesos. If the offender be a corporation, partnership, or juridical
person, the penalty shall be imposed on the officer or officers responsible for permitting or
causing a violation by the corporation, partnership, or juridical person of the provisions of
this Act;

(c) Ifthe offender is a government official or employee, the maximum penalty prescribed
in paragraph (b) shall be imposed and the offender shall suffer the additional penalty of
perpetual disqualification from public office without prejudice to any administrative action
against him;

(4) If the offender is a member of the Petroleum Regulatory Council or any of its attached
agencies and companies, and the commission of the offense is attended by clear abuse of
discretion on his part, or by any corrupt practice defined in Republic Act No. 3019, otherwise
known as the “Anti-Graft and Corrupt Practices Act”, or other similar irregularity, the penalty
imposed shall be a fine of one hundred thousand pesos and imprisonment of not less than ten
years. A similar penalty shall be imposed upon any private person, whether in the
government service of not, who induces, aids, or abets the offender in the commission of the
offense;

(©) __ It shall be an offense, penalized as provided in paragraph (c) or (d) above, whichever
may be applicable, for any person serving in the Petroleum Regulatory Council or any of its
attached agencies and companies, either as a Chairperson, Member, o as a member of the
staff to directly or indirectly be employed by, or to receive any compensation from, ot to have
any direct or indirect financial interest in, any firm engaged in the business of exploring,
exploiting, importing, exporting, re-exporting, shipping, transporting, processing, refining,


storing, marketing, distributing, and selling both at wholesale and retail any petroleum
resource; and

(Any alien violating this Act shall, in addition to the penalty herein provided, be
deported after service of sentence and shall not be permitted reentry into the Philippines.

(g) All monetary penalties shall directly accrue to the Oil Price Buffer Fund.

SECTION 20. Implementing Rules and Regulations, - The Petroleum Regulatory Council
shall formulate and issue the necessary implementing rules and regulations within thirty (30)
days after the effectivity of this Act.

SECTION 21, General Repealing Clause,

(a) Republic Act No, 8479, also known as the “Downstream Oil Industry Deregulation
Act of 1998” is repealed.

(b) _Allother laws, decrees, executive orders, rules and regulations, or parts thereof
inconsistent with any of the provisions of this Act, are hereby repealed or amended
accordingly.

SECTION 22. Separability Clause. - If, for any reason, any section ot provision of this
Act is declared unconstitutional or invalid, such other sections or provisions not affected
thereby shall remain in full force and effect.

SECTION 23. Effectivity. — This Act shall take effect fifteen days after its complete
publication in two (2) national newspapers of general circulation

Approved,