Removal of VAT on Meralco systems loss pushed at House
By Maila Ager
INQUIRER.net
First Posted 11:32:00 05/13/2008
(UPDATE) MANILA, Philippines -- A proposal to remove the value added tax (VAT) on power, specifically tax being imposed on the systems loss of the Manila Electric Co. (Meralco), highlighted the House of Representatives’ investigation Tuesday into the rising cost of electricity in the country.
At the hearing of the committee on energy headed by Pampanga Representative Juan Miguel Arroyo, APEC Partlyist Representative Ernesto Pablo proposed the scrapping of the 10 percent VAT on power to reduce the rates of Meralco by at least P1 per kilowatt hour.
Meralco president Jesus Francisco told the committee that an overall average of 83 centavos per kilowatt hour from government taxes was included in the consumers’ electric bill.
If this tax will be scrapped, Pablo said then the public would be unburdened by at least P1 per kilowatt hour or 83 centavos for those in the provinces.
Pablo then took the opportunity to ask the committee’s support for his bill seeking to exempt the power sector from the VAT.
Pablo said Meralco’s rates would also go down by another 20 centavos if the Energy Regulatory Commission would approve the estimated P10 billion quarterly recovery for refund, over collection, or under refund by the National Power Corp. (Napocor).
“Based on our estimate because of the improvement in the foreign currency, we estimated the amount of P10 billion that can be plowed back to the consumers by the NPC,” said ERC executive director Francis Saturnino Juan.
“That will translate to a 20-cent reduction in the rates once approved by the ERC but the final figure will depend on the filing of NPC, which we expect anytime soon,” he said.
To further reduce the cost of electricity, Pablo also proposed the suspension of the implementation of the Wholesale Electricity Spot Market (WESM), where electricity is being sold in the market.
There have been allegations that Meralco’s rates were high because they were buying from their own independent power producers through the WESM.
Camarines Sur Representative Luis Villafuerte said the tax being imposed on Meralco’s systems loss should also be removed because it was not covered by the VAT law.
Villafuerte said that under the law, VAT should be assessed and levied based on the sales of goods and services.
“Now if we apply the VAT on systems loss, is Meralco saying that pilferage should now be subject to VAT? Is the utility company selling a technical loss? I don’t think so,” he said.
But Bureau of Internal Revenue director James Roldan defended the imposition of tax on Meralco’s systems loss.
“Tama po na lahat ng sales as far as services, lahat ng sale on goods, lahat ng importation ay subject sa VAT. Dito po sa electricity, sa power industry, Meralco is charging a fee and that’s reflected in the Meralco bill,” said Roldan.
“Yung systems loss, ang position po namin dyan that is part of the service fee of Meralco. So there’s actually a service fee by Meralco,” he further said.
Meralco president Jesus Francisco acknowledged, however, that they should not tax the systems loss that they had been passing on to their consumers.
Under the law, distribution utilities are allowed to pass on to consumers up to 9.5 percent of their systems losses.
“Yun pong EVAT na ipinapatong sa systems loss, dapat po hindi na nire-recover from customers [The EVAT on systems loss that should not be recovered from consumers]” Francisco said.
While Meralco was inclined to remove that tax, Francisco said the government should also consider removing the tax being imposed on cross subsidy.
“Baka ho yung cross subsidy na nagbabayad yung mga malaking consumers para doon sa maliliit, baka yun din po maalis yung EVAT kasi yun po extra burden po ng consumers [The cross subsidy that big consumers are paying for the small ones, that might also need to be scrapped since it is also an added burden to consumers],” he said.
“Kami rin po hindi nakikinabang doon sa EVAT para doon [We in Meralco are not getting anything from the EVAT],” he said.
To further reduce the cost of electricity, Villafuerte also asked the NPC to implement a flat rate nationwide.
Earlier in the day, Congressman Arroyo was asked by Akbayan Partylist Representative Risa Hontiveros to inhibit himself “in the interest of delicadeza” from the hearing because she said she would be making statements against his mother and President Gloria Macapagal-Arroyo.
But Arroyo refused, saying his committee has always been fair and accused Hontiveros of having been "very biased" against his family and the present administration.
Hontiveros took offense against the chairman's comment, saying she was surprised by his “personal response” to her motion.
To break the tension, Camarines Sur Representative Luis Villafuerte appealed to committee members not to inject politics on the discussions and stop blaming the administration on the rising cost of power.
Aside from Francisco, present in the hearing were National Power Corp. (Napocor) president Cyril del Callar, Alejandro Barin of the Energy Regulatory Commission, among others.
Government Service Insurance System president and general manager Winston Garcia could not attend the hearing because of a prior engagement.
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