Salceda to study move to scrap VAT on utilities, hike on franchise tax
MANILA, Philippines — The chairperson of the House Committee on ways and means has promised to look intently on the Makabayan bloc’s bills seeking to remove value added tax (VAT) on several utilities, on the condition that franchise taxes would be increased.
During an online interview with reporters on Thursday, Albay 2nd District Rep. Joey Salceda said that it is imperative that the government’s collection would not decrease, because revenue from these taxes would be used for social programs.
“So I can tell Makabayan that the Committee on ways and means will seriously study removing the VAT on the utilities provided that we increase the franchise tax,” Salceda said in Filipino.
“Basta isa lang po ang rule: hindi pu-pwedeng bumagsak ang collection ng gobyerno dahil ang fiscal incidence po ng budget natin, ‘pag gumagastos ang gobyerno, more or less po ang nakikinabang po ang masa, through education, through health, and especially through infrastructure in the countryside,” he added.
(There is only one rule: the collection of the government must not drop because the fiscal incidence of our budget, when the government spends, more or less the masses benefit through education, through health, and especially through infrastructure in the countryside.)
Salceda said it is possible to mimic the system they placed with water concessionaires, where the 12 percent VAT was stripped from the consumers’ bills but franchise taxes for these companies increased — offsetting any possible decrease due to the VAT exemption.
He assured that the increase in franchise tax would not be passed on to consumers, as the National Internal Revenue Code forbids it.
“Alam niyo pinag-aaralan po nang maiigi ‘yan, kasi ang nangyari no’n sa Maynilad at Manila Water, basta kasi mga proposal, seryoso ko pong pinag-aaralan ‘yan. No’ng tinanggal namin ‘yong VAT sa tubig, tignan niyo ‘yong water bill niyo ah, pero inincrease namin ‘yong franchise tax, bumaba po ‘yong binabayaran niyo pero ‘yong nasisingil po ng gobyerno ay hindi bumaba,” he explained.
(You know we have studied that intently, because what happened with Maynilad at Manila Water, I study every proposal intently, when we removed the VAT on water, look at your water bills, it decreased. But we increased the franchise tax, so the water expenses went down but the government’s collection did not decrease.)
“I’m talking here (about) for example, the excess profits, excess profitability of distribution companies, excess profitability of transmission companies. So kita niyo naman, I am, I always, we diligently study everything, every proposal na which may provide relief to our consumer,” he added.
Earlier, Makabayan bloc lawmakers — Alliance of Concerned Teachers party-list Rep. France Castro, Gabriela party-list Rep. Arlene Brosas, and Kabataan party-list Rep. Raoul Manuel — refiled these bills that seek to remove taxes on utilities:
- House Bills (HB) No. 5994, which seeks to remove VAT from the system loss charge component of electric bills
- HB No. 5995, which calls for the removal of VAT in the electricity sold by generation, transmission, and distribution
- HB No. 5996, which proposes to strip tollway companies’ fees and services of VAT
- HB No. 5997, which asks that VAT in water services and items imported or bought to help companies distribute water
- It is unclear however if the HB No. 5997 would call for a separate tax exemption considering that the Metropolitan Waterworks and Sewerage System (MWSS) Regulatory Office already ordered last March that the two water concessionaires operating in Metro Manila and nearby provinces stop collecting VAT.
Makabayan said that the tax exemptions — including their previous proposal to exempt basic commodities from VAT, under HB No. 5504 — would shield poor communities from rising prices of goods.
However, Salceda — who said that President Ferdinand Marcos Jr. asked him to review possible VAT exemptions — maintained that he would only support the tax exemption for the utilities, and not on proposals where the government stands to lose money.
“Actually meron din po talaga akong instruction from the President to study that ano, and I’m not releasing it because I made a proposal to the Office of the President, so I would’ve wanted to — but since you asked me comment on the Makabayan (bill),” Salceda said.
“But not on the other products wherein babagsak po ang revenues ng government,” he added.
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