Senior administration congressmen Tuesday urged government and Pilipinas Shell to strike a compromise in resolving the controversy surrounding the oil firm’s alleged unsettled tax obligations amounting to P7.3 billion.

Pampanga Rep. Juan Miguel “Mikey” Arroyo, eldest son of President Gloria Macapagal Arroyo, said both Pilipinas Shell and the government should be open to accept a compromise solution rather than maintaining hard line stances.

The proposal of Arroyo, chairman of the House Committee on Energy, is backed by House Deputy Speaker for Mindanao Simeon Datumanong who said that both parties must continue to discuss ways of resolving the issue.

However, both Datumanong and Arroyo stressed that government must only agree to a deal that would invoke its taxing power and not force it into accepting an unreasonable compromise.

They said both parties could agree on payment structures.

“The government should not be coerced to prevent it from doing its legitimate duty but a fair negotiation on reasonable terms is reasonable,” Datumanong said.

Arroyo said Pilipinas Shell should be aware that it is their responsibility to pay the government the taxes due them.

“While I recognize the fact that it is Shell’s prerogative to continue or stop conducting business here in the Philippines, I call on the Shell management to settle their tax obligation instead of threatening to close shop if they are forced to pay their unsettled taxes on their shipment of unleaded gasoline dating back to 2004,” the Pampanga solon said.

He reminded Shell not to shirk its tax obligations to the government.

Shell has reportedly warned it would close down its business in the country if government insists on demanding payment of its customs duties and taxes.

“If they (Shell) cannot pay in lump sum the P7.3 billion they owe the government in taxes. I propose they sit down with the BoC and the BIR and come up with a payment structure and settle their obligations in significant tranches,” Arroyo said.

The government is trying to collect from Shell for the importation of catalytic cracked gasoline (CCG) which, the oil firm said, is a component of unleaded premium gasoline but which, the government said, is unleaded gasoline already.

Components for gasoline are not subject to excise taxes since they will be used for blending with gasoline; once the gasoline is withdrawn for sale to the public, however, excise taxes are paid.

The BoC and BIR said Shell paid excise taxes on its CCG importations before 2004. But after that year up to the present, Shell has not paid excise taxes on its CCG imports, although other oil companies do. The uncollected taxes now amount to P7.34 billion, excluding interest and penalties.

The BoC has demanded payment of the amount or else it would seize Shell imports and sell them at public auction until the amount is paid. Shell, on the other hand, threatened to pull out from the Philippines.

Arroyo said unleaded gasoline is not a catalytic agent or a raw material as Pilipinas Shell claims it to be.