Agnes Devanadera, Chair of the Energy Regulatory Commission (ERC), raised the subject of double taxation on electricity with the incoming administration on Thursday, hoping to lower the high power tariffs now paid by end-users.
Devanadera urges the government to scrap the 12-percent value-added tax (VAT) on the generation charge, arguing that the tax should only be applied to the distribution charge.
Generation, transmission, distribution, universal, and feed-in-tariff allowance (FiT-All) charges are all included in an electricity bill. Power distributors such as Manila Electric Co (Meralco) and power cooperatives collect these from their subscribers monthly. The rest is subject to VAT, except for the universal and FiT-All costs.
The VAT on the distribution charge, or the cost of supplying power to households and other end-users, is paid by these distribution companies and passed on to consumers.
Companies that generate energy, such as Aboitiz Power Corp and First Gen Corp, must also pay VAT on their fuel.
The average Filipino consumer pays taxes twice for using energy daily.
Removal of 12% VAT on power rates proposed
About half of the entire electricity bill is made up of the generating charge, which is the cost of electricity sold by power producers to distributors.
A lawyer, Devanadera, indicated that no legislation is required to correct the double VAT calculation. However, she suggested that the Bureau of Internal Revenue (BIR) might provide a legal interpretation of this particular tax policy.
The sale of generated power should be classified as VAT zero-rated under the Electric Power Industry Reform Act of 2001. However, following laws amending the VAT provisions of the National Internal Revenue Code (NIRC) of 1997, this clause was repealed.
Apart from limiting the VAT to distribution costs, Devanadera suggested that the next administration consider suspending the tariff on coal and petroleum products.
Devanadera said the decrease in tax revenue from the energy sector might be offset by raising taxes on “non-essentials.”
She stated higher car charges, Philippine offshore gaming operators (Pogos), and other gambling operations.
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