Cayetano to government: reduce vat and natural gas royalties

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THE government may not have a “magic wand” to instantly stop power rate increase in the country but it possesses power that could help cushion the hikes and spare the people from burdensome power rates, Senate majority leader Alan Peter Cayetano said Friday.

But aside from bringing misery to the public, Cayetano said, the current power rate in the country which is among the highest in the world, also discourages investors from bringing their businesses into the country and in effect denying the people of possible job opportunities.

According to him the government should be more result oriented and start focusing on actions that would provide the public relief from the various rate hikes on electricity, fuel, and even social security premiums.

Cayetano is insisting that the government should consider reducing value added tax (VAT) on power and natural gas royalties to bring down the cost of power.


Citing a study conducted by the United States Agency for International Development (USAID) the country could immediately bring down power rates by P1.4 per kilowatt hour (KwH) if the government reduce VAT and natural gas royalties.

Cayetano also cited the study made by Dante Canlas, former head of the National economic Development Authority (NEDA) on the effects of reducing VAT and royalties in 2009, which showed that government could lose P13.84 billion in revenues.

However, because the move would also result in lower power, investors will be attracted  to invest in the country which in effect could increase annual gross domestic product (GDP) by P62.35 billion, provide additional annual tax revenue of P8.72 billion and additional annual non-Tax revenue by 989.4 million.

Cayetano also warned that if the government would not  act now the country is expected to experience much worst situation in the future.

These are just some of the many option available to the government at present and they must act fast before the situation gets worst.

“The government must not profit from people’s misery. It must be willing to let go of some revenues to be able to gain more,” he added.

Meanwhile Senator JV Ejercito has criticized the government for not exerting efforts to avert the continued rise in the price of electricity in the country.

Ejercito said such failure was clearly established during the joint senate committee hearing Thursday when the government opportunity to intervene failed.

The senator particularly mentioned the case of the state-owned Malaya power plant, which was not used by the government to somehow bring down the power rates.

The plant has the capability of generating a total of 600 megawatts but since running it is so expensive the government decided to just place it under economic shutdown.

“One glaring point that we were able to establish during the hearing is that there was no effort on the government’s end to step in to avert such spike on the price of power,” Sen. Ejercito said.

He added that during these times, it is important that all sectors in the industry must get their acts together for the benefit of the public.

“An efficient mechanism should be in place to prevent such incidents. These findings are imperative in determining what amendments should we introduce in EPIRA (Electric Power Industry Reform Act) law or what modifications should be made in the WESM (Wholesale Electricity Spot Market) rules,” he added.

Replacing ERC head

Meanwhile, in a related development, Cayetano doesn’t see the removal of Energy Regulatory Commission (ERC) chair Zenaida Ducut, as a major solution to the country’s current power woes although such move could have some minor benefits.

“Even if you appoint a new ERC chair tomorrow, the same system, the same players, the same conditions will be there,’’ Cayetano said in a press conference.

The senator said that the replacement of the ERC chair is a partial solution because others believe that the ERC had been negligent.

“The ERC has powers to regulate the industry, but the system that we put in place doesn’t work,’’ he said. JEFFERSON ANTIPORDA

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1 Comment

  1. Please include taxes on petroleum as well. The high taxes and the high cost of living during the past few years is too heavy a burden for Filipino taxpayers and consumers to bear!