Remove VAT on power generation, distribution—lawmaker
Marikina Rep. Romero Quimbo. INQUIRER.net FILE PHOTO
MANILA, Philippines—More proposals are coming forth from lawmakers as they attempt to find ways to bring down power costs.
Removing the value-added tax on power generation and distribution could be one way to bring down electricity prices and ease the burden on consumers who, in the end up, would pay for them anyway, Marikina Rep. Romero Quimbo, chair of the House ways and means committee, said.
Quimbo said his committee, along with the energy committee, would study the possibility of removing the 12-percent VAT on generators and distributors, and replacing this with a lower, fixed tax.
“This is not for the benefit of companies or corporations engaged in energy because they pass on the VAT to the public. This is for the benefit of the consuming public. If we bring prices down, we will see the immediate impact on consumers,” Quimbo said in a press briefing.
On the other hand, Eastern Samar Rep. Ben Evardone, who had pushed for emergency powers for the President to address the energy sector’s problems, filed a bill to prohibit cross-ownership among power generation and distribution companies, as a move to prevent collusion that could lead to skyrocketing electricity prices.
Quimbo said a World Bank study showed an 85-centavo-per-kilowatt-hour reduction in power costs if the tax structure were revised and the VAT removed.
He also said that while removing the VAT on power generation and distribution could lead to a loss in government revenue, the move would still bring about more benefits that would help the country grow.
He said lower power costs would entice investors to come in to the country and this, in turn, could lead to more jobs.
“This could be one solution so that we could have an economic development that is really job-generation centered,” he said.
Removing the VAT could also lower prices of basic commodities, because production costs would go down, he said.
He further said the country needed to lure in more investors in the energy sector to prevent a severe lack of supply in the near future.
Makabayan bloc lawmakers have a pending bill seeking to exempt electricity as a commodity from VAT. According to them, Filipinos are already overtaxed, and the Philippines also has one of the highest electricity costs in Southeast Asia.
But Malacañang has not embraced the idea, earlier saying it would leave the matter up to Congress.
Evardone said the failure of Electric Power Industry Reform Act to ban cross-ownership has led to rising power costs.
“Under Epira, only a few corporations dominate in both the generation and distribution sectors. This setup has recently fueled allegations among players in the generation sector and/or with those in the distribution chain,” Evardone said in the explanatory note of his bill.
He noted that the EPIRA banned any distribution or generation company from owning a share in National Transmission Corp. But there is no such ban between generation companies and distribution utilities.
The absence of such a prohibition has led to soaring electricity rates, according to him, since the only safeguard coming from EPIRA is the prevention of distribution utilities getting more than 50 percent of their total power demand from bilateral contracts with related generation companies.
Evardone’s bill states that no distribution utility or its subsidiary, affiliate, stockholders, officials or any of their relatives within the fourth civil degree of consanguinity should be allowed to hold any interest in any generation company, and vice versa.
Should the bill pass, such existing interests must be divested within one year.
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