MANILA, Philippines - Two business groups voiced out their concerns over the Bureau of Internal Revenue's (BIR) reversal of its position on a tax issue involving Pilipinas Shell Petroleum Corp.

The Bureau of Customs (BOC) threatened to seize P43 billion worth of Shell's catalytic cracked gasoline (CCG) and light CCG (LCCG) imports as payment for alleged back taxes. Shell, citing BIR's past ruling, said CCG and LCCG are merely raw materials and not finished products subject to excise taxes.

The BIR reversed this ruling. (Read: BIR to tax shell's imports; reverses earlier ruling)

In separate letters to BIR Commissioner Joel Tan-Torres, the Employers Confederation of the Philippines (ECOP) and the European Chamber of Commerce of the Philippines (ECCP) urged the tax bureau to revisit the reversal to assure existing and potential investors on policy stability, equity, and fairness in a free market economy.

"This reversal has a chilling impact on the financial operations of all companies in the country as it imposes a monetary and criminal liability with a retroactive effect on enterprises that faithfully complied with existing tax policies," ECOP president Edgardo Lacson said.

"We view this development with grave concern because of the far-reaching implications that this case is showing. First is that the country is discouraging investments in manufacturing because raw materials are taxed and the finished products are taxed again and such double taxation favors traders over manufacturers. Second is that any opinion by any government agency can be reversed anytime so there is no stability that business expects and investments decision are built upon," ECCP added.

In 2004, the BIR arrived at an opinion that Shell's CCG and LCCG imports were merely raw materials.

The said opinion was affirmed by the BIR under 3 previous commissioners, with the latest affirmation done in July last year.

"Then, in December, with the entry of a new BIR commissioner, said opinion was reversed and Shell is now being asked to pay taxes retroactively from 2004 onwards," ECCP said.

At present, Shell is disputing the tax assessments before the Court of Tax Appeals.