• VAT exemption for electricity backed

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    AMID higher electricity rates this month, a consumer advocacy group has urged Malacañang to support a Senate measure abolishing the 12-percent value-added tax (VAT) imposed on the sale of electricity and other power generation deals.

    CitizenWatch said the proposal being pushed by Sen. Sergio Osmeña 3rd, chairman of the Senate Committee on Energy, is the “first and fastest step” in lowering the high electricity costs in the country.

    “As it is, power rates in the country, which is one of the highest in the region, is oppressing the poorest consumers all the way to the biggest businesses,” said CitizenWatch convenor Tim Abejo.

    Because of this, CitizenWatch urged President Benigno Aquino 3rd to certify as urgent Osmeña’s Senate Bill 2714, which exempts from VAT the sale of electricity, specifically covering distribution, generation, and transmission costs of companies and electric cooperatives.

    “As a tax measure, this proposal should be certified urgent by the Aquino administration,” said Wilford Wong, CitizenWatch secretary general.

    Wong said the proposal is also timely in light of the Asean integration, which is seen to bolster competition among industries from member nations.

    The high cost of power in the Philippines, he added, is putting the country’s industries at a disadvantage.

    “The ultimate goal is to make our industries more competitive in terms of doing business and attracting investments, and power is one of the major factors in those two,” said Wong.

    The measure seeks to amend Sections 108 and 109 of the National Internal Revenue Code of 1997 by adding power-related transactions to those exempted from the VAT, primarily to provide relief to consumers.

    It also seeks to exempt from VAT the services of franchise grantees or electric utilities, as well as the sale or importation of machinery and equipment – including spare parts – to be used directly by the buyer or importer in electricity generation, transmission, and distribution.

    In filing the measure, Osmeña said the VAT on electricity is another burden on the over-taxed Filipinos, especially those whose incomes are barely enough to cover their basic needs.

    “Thus, in the light of the unabated price increases in fuel, food, and other commodities, Congress is duty bound to find ways of providing economic relief for the Filipino people.

    The removal of VAT on electricity is one of the reliefs that Congress should immediately act upon,” said Osmeña.

    The senator noted that the Philippines has one of the most expensive electricity rates in Southeast Asia.

    Based on the analysis conducted by the senator, a household consuming 200 kWh a month carries an estimated P188.55 in VAT, which is a substantial amount for the average working Filipino to bear – considering that the price per kWh may range from P5.49 to as high as P12.1

    CitizenWatch also echoed Osmeña’s position that any losses in tax revenues that might be incurred by the government once the proposal is passed into law will be offset by increased purchasing power of all households and businesses.

    “The economic gains across sectors will far exceed any lost tax revenues,” Wong said.

    CitizenWatch represents consumer interests in the Department of Energy (DOE) task force to lower the cost of electricity. It also launched Power Plant Watch to deter electric price manipulation during the critical months of summer.

    Manila Electric Co. on Wednesday announced that there will be an increase of 27 centavos per kWh in its electricity charges this month, which is also expected to be experienced by consumers in May.

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