Finance Secretary Carlos Dominguez III debunked the claims that there is double taxation in the value-added tax (VAT) on power rates.
The statement comes after outgoing Energy Regulatory Commission (ERC) chairperson Agnex Devadnadera proposed to remove the double VAT imposition as well as suspend the excise tax in order to lower power rates in the country.
In a Business Mirror report, Dominguez said that “double taxation” does not exist in the electric power industry, saying that “VAT is imposed separately in each stage of the production” citing Republic Act (RA) 9136 or the Electric Power Industry Reform (EPIRA) mandating prices to be unbundled.
Dominguez said that through the unbundled price mechanism, VAT is imposed on every level in the value chain and is not integrated vertically. The finance chief further explained that the VAT paid in distribution charges only accounts for tax in distributing the electricity and does not include the generation and transmission of power.
He also stressed that double taxation would only exist if two taxes are imposed in the same subject matter, for the same purpose, within the same jurisdiction, by the same taxing authority, during the same taxing period, and must be the same kind of character.
The outgoing Department of Finance (DOF) secretary added that “at the end of the day if you look at the total bill, the entire electricity service is charged 12 percent VAT on the side of the consumer.”
The finance secretary also stressed that the removal of VAT is not the solution to reduce power prices. To “unburden consumers,” Dominguez said, the upcoming administration would need to review the existing policies on power generation.
The country’s electricity prices remain high versus other Southeast Asian countries due to the high costs associated with power generation, DOF said.
The Finance department also rejected proposals of suspending the excise tax on fuel as it could deplete government funds for its COVID-19 pandemic response.