House panel mulls exempting power rates from VAT

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A House leader seeks to scrap the value-added tax (VAT) in electricity and replace it with a fixed tax scheme to unburden consumers with high power prices, administration lawmakers said on Tuesday.

In a news conference, House Committee on Ways and Means chairman Rep. Romero Quimbo of Marikina City said that it is about time for the government to revisit the imposition of VAT on power to alleviate electricity rates.

“We need to study that further—if we need to bring back the fixed franchise tax or any tax that we can collect [from power producers]in order to lessen the burden of the consuming public,” Quimbo said.

Quimbo explained that in the three stages of power production, generation and distribution phases are imposed with 12 percent VAT, which makes a consumer pay a total of 24 percent VAT in each electricity bill. If the tax will be eliminated, it will reduce the power charges with 85 cents to P1 per kilowatt-hour.


The lawmaker said that the committee is still studying how to scrap VAT on electricity without compromising the government’s revenues and projects. He proposed to bring back the fixed franchise tax, which is the scheme currently imposed on power transmission companies.

“We need to know the impact of this move. Many people think that when power costs are low, more investors will invest, more jobs will be generated, and maybe this can be the solution of a holistic economic development that is really job-generation centered,” he added.

Quimbo said that the House panel can take off from House Bill 344 filed by Bayan Muna Reps. Neri Colmenares and Carlos Zarate that seeks to remove VAT on power. The bill has been pending at the committee level since last July last year.

Epira repeal unlikely

Meanwhile, Rep. Rey Umali of Oriental Mindoro said that repealing the disputed Electric Power Industry Reform Act (Epira) is very unlikely because it is not yet needed by the country.

“I think, off hand, I don’t see the abolishing of Epira is needed. I think we need to tweak the Epira, not necessarily to repeal it, or propose certain amendments,” said Umali, chairman of the House Committee on Energy. “Anything is possible but the idea is to enhance our existing mechanisms, not to overhaul it.”

Quimbo seconded Umali’s stance and noted that despite the unabated increases in power rates, Epira has not become a total failure because it modernized the power industry since it was implemented in 2011.

“There have been aspect of the Epira that has brought us where we are today in terms of addressing as well as modernizing our energy sector,” Quimbo said.

The House Committee on Energy is set to review bills seeking the amendments and repeal to Epira by February and aims to present the amendments before the plenary by the end of the second regular session of the 16th Congress, which is on July 2015.

Cross-ownership

On the same day, Eastern Samar Rep. Ben Evardone filed House Bill 3676 prohibiting cross-ownership in the power generation and distribution companies to prevent collusion among energy market players.

Evardone said that distribution companies, their subsidiaries, officials, stockholders and their relatives should be banned from holding interest in generation companies, and vice versa.

He said that EPIRA’s “failure to provide a ban on cross-ownership between generation companies and distribution utilities” resulted in the sky high power rates “to the detriment of the Filipino power consumers.”

“In the present set-up, only a few corporations dominate both the generation and distribution sectors. This fuels the recent allegations of collusion among players in the generation sector and/or with those in the distribution chain,” Evardone added.

He said that existing interest must be divested within one year from the effectivity of his proposal. However, he allows generation players to buy limited shares in another generation company to ensure fair competition. JHOANNA BALLARAN

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1 Comment

  1. Nice that congress would revisit our VAT law. Discarding VAT on power would not reduce government revenues.

    BIR Commissioner Henares should instead intensify collection of taxes and make good her words that she would run after tax errants. She should enforce collection of the huge unpaid tax deficit of P1.5 billion for year 2007 still due from GOLDEN DONUTS, INC. (GDI) and sue the company for tax evasion for under-declaring its revenues in the tax returns. It had two sets of numbers on sales for the period. One contained a net taxable income of P135.2 million, while the annual income tax return reflected a net loss of P44.9 million. GDI is the Philippines’s exclusive franchisee of DUNKIN’ DONUTS OF AMERICA, INC. (DUNKIN’ BRANDS, INC.).

    The BIR captain scares other taxpayers but fears DUNKIN’ DONUTS local seller….a TAX EVADER?