Tovic Salvador

Lawmakers eye reducing VAT on power to reduce electricity costs

Article (news)

Alvin Elchico

ABS-CBN News

MANILA — Several lawmakers are proposing to reduce the value added tax on energy players to bring down the cost of electricity.Marikina Rep. Miro Quimbo, who heads the House Ways and Means Committee, said the lower chamber is studying how to reduce the value-added tax passed on to consumers and end users.Quimbo said power generated from power plants carries a 12 percent VAT when sold to transmission and distribution utilities, which in turn impose another 12 percent VAT when that same electricity is sold to consumers.&quot;In the end, what happens is all of those taxes are shouldered by the consumer, which we think is unfair,&quot; said Quimbo in an interview with DZMM&#x27;s Gising Pilipinas last February 10.Meralco explained that the VAT is imposed on each segment as these are different kinds of service, meaning generation, transmission and distribution. Meralco Head for Utility Economics Larry Fernandez said if all the VAT in each segment is removed, electricity prices will decrease by around P1.27/kilowatt-hour.But it&#x27;s not that easy to remove the value added tax, as this needs legislation.Senator Sherwin Gatchalian, who used to head the Energy and Ways and Means Committees in the upper chamber, said there is a huge repercussion on the government&#x27;s revenue generation if the VAT on power generation and distribution is removed.But Gatchalian said he is already studying the possibility of reducing the pass-on VAT to consumers.&quot;Ang kinu-compute namin ngayon ay yung generation ba nadodoble yung VAT nya pagdating sa transmission at pagdating sa distribution. Dapat di yan nagdodoble; dapat pass-on yan direcho yan sa consumer. Yan ang tinatapos nanin ngayon. Ang aming direksyon-- di madoble dapat tanggalin sa bill ng konsyumer,&quot; said Gatchalian.Energy Regulatory Commission Chairman Nino Juan is in favor of removing the value added tax on electricity, which will result in lower prices of electricity for ordinary consumers and businessmen.But many consumers also wonder why there is a slew of charges in the monthly bill that need to be paid.Aside from the generation, transmission and distribution costs, consumers are also burdened by other charges like taxes where VAT is included, subsidies like the universal charge for missionary electrification, system loss, and even the feed-in tariff and green energy auction allowance for renewable energy developers.Juan said these are all justified under the law, and these extra charges have been approved by the regulator.

Several lawmakers are proposing to reduce the value added tax on energy players to bring down the cost of electricity.

Several lawmakers are proposing to reduce the value added tax on energy players to bring down the cost of electricity.