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THE
frenzy to determine—and curb—the extent to which
value-added taxes (VAT) have been imposed on the power
sector has seized both houses of Congress.
Four
party-list representatives filed a bill seeking to lift
the VAT on electricity—Reps. Teodoro Casiño and Satur
Ocampo of Bayan Muna and Liza Maza and Luzviminda Ilagan
of Gabriela. They included Anakpawis Rep. Crispin
Beltran, who died in an accident at his home hours
before the bill’s filing, as coauthor of House Bill
4162.
The bill
classifies as VAT-exempt transactions “the sale of
electricity by generation, transmission and distribution
companies and electric cooperatives, and the services of
franchise grantees of electric utilities, and sale or
importation of machinery and equipment directly used in
generation, transmission and distribution of
electricity.” It amends Sections 108 (a)(ii) and 109 (1)
of the National Internal Revenue Code, as amended by
Republic Act 9337.
This
developed as members of a congressional oversight panel
are set to ask the Bureau of Internal Revenue (BIR) to
stop collecting the 12-percent VAT on system losses
tucked into consumers’ electric bills, as the VAT law
covers only goods and services.
Sen.
Francis Escudero, Senate ways and means committee
chairman, insisted that the BIR need not wait for
Congress action to scrap the VAT on system losses being
passed on to electricity users, as this can already be
done “via a revenue regulation” order from the bureau.
“In
fact, we have a hearing on Thursday by the Oversight
Committee on the CTRP [Comprehensive Tax Reform Program]
wherein we will be asking the BIR to precisely do that,”
Escudero told reporters.
The
senator suggested that the VAT on system loss, the
franchise tax and royalties on gas and geothermal plants
can also be removed by the BIR without waiting for
congressional action “because you cannot impose a tax on
tax. Neither can you impose VAT on system loss because
it is neither goods or services. So [BIR’s] own
interpretation of the law will suffice via a revenue
regulation or a revenue memorandum circular.”
“Hindi
na kailangan pa ng bagong batas para klaruhin ’yon,
dahil ang intensyon talaga ng VAT eh, buwis ’yan
sa goods at services; ’yung nawala at
ninakaw na kuryente kahit anong klaseng pangarap at
panaginip ang pwedeng gawin mo, hindi pwedeng maging
goods at service ’yung nawala at ninakaw na kuryente
[You don’t need a new law to clarify the matter
because the intention of VAT is simply to tax goods and
services; no amount of dreaming can turn the electricity
lost to thieves or incompetence into a VAT-able good or
service],” he added.
In a
press briefing, Escudero also rejected a finance
department option to provide a cash transfer mechanism
and other forms of subsidies to the poor, instead of
simply suspending collection of the 12-percent VAT on
oil and electricity. “That (cash transfer) is similar to
a coupon system. But the problem with the coupon system
is that it is prone to abuse and corruption.”
He said
the Senate is studying proposed options to exempt or
remove the VAT on petroleum products, or just suspend
its imposition. He, however, admitted that their hands
are tied, as the Senate has to wait for action from the
House where all tax measures emanate. He noted, however,
“a glimmer of hope after Speaker Prospero Nograles
indicated the congressmen were open to amending the law
with respect to the VAT imposed on oil and power.” That
process may be fast-tracked with Tuesday’s filing by the
party-list bloc of HB 4162.
The
authors of HB 4162 said removing the VAT on power may be
the fastest and most direct form of economic relief for
all households. “Whatever revenue losses to be suffered
by the government will be offset by the increased
purchasing power of all households, as well as cheaper
production costs, redounding to a more robust and
equitable economy,” their explanatory note said.
The
legislators said VAT accounts for about 10 percent of
the electricity bills, estimated at 70-75 centavos/kWh.
It is applied even on systems losses, lifeline rate
subsidies and local franchise taxes, which, strictly
speaking, are supposed to be non-VAT-able items.
“It is
estimated that when the VAT on power is removed,
customers could save up to P1.50/kWh in monthly rates.
Thus, a family consuming 200 kWh a month can easily cut
their electricity bills by around 10 percent, saving
them at least P206 from their monthly bills that reach
more than P2,000, inclusive of VAT,” they said.
But
Nationalist People’s Coalition Rep. Giorgidi Aggabao of
Isabela filed a variant: House Bill 4057, seeking the
scrapping of the system loss being charged to consumers,
which amounts from 9 ½ percent to 14 percent of the
total power bill.
At the
Senate, Escudero explained that as far as taxes on power
are concerned, there are many other tax impositions that
could be removed to further reduce electricity costs
passed on to consumers. “There’s the VAT on franchise
tax, VAT on royalty, VAT on systems loss—the BIR by
itself can already remove those by simply issuing
revenue regulations.”
The ERC
alone can move to remove VAT on systems loss. The VAT on
royalty (from the oil-gas exploration sites) may be
removed by presidential fiat, he added. “So, at
different levels, different people and agencies can
already move to ease the tax burdens on this sector.” |
