Outgoing Energy Regulatory Commission (ERC) Chairperson Agnes Devanadera has proposed to the next administration to suspend the excise tax on coal and petroleum products to mitigate the impact of international prices amid the conflict between Russia and Ukraine.
In a report by The Philippine Star, Devanadera said that she is submitting her proposals to lower power rates to the incoming administration, which include the suspension of excise tax and the removal of double Value Added Tax (VAT) imposition in pass-on costs.
Devanadera, who will step down on July 9, said that removing tax is the most effective way to help lower power rates as it can be felt immediately by consumers and have the least impact on stakeholders.
Prior to the implementation of Republic Act (RA) 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law, the Manila Electric Company’s (MERALCO) generation rate was at Php5.8623 per kilowatt-hour (kWh). This increased to Php 5.8724/kWh post-TRAIN.
The Department of Finance earlier rejected proposals of suspending the excise tax on fuel as it could deplete government funds for its COVID-19 pandemic response.
Devanadera is also pushing for the clarification of VAT computation on gross receipts and the temporary decrease of VAT charges in the generation rates.
While generation charges were originally zero-rated under RA 9136 or the Electric Power Industry Reform Act (EPIRA), Devanadera said the Bureau of Internal Revenue’s (BIR) implementing rules and regulations on VAT computations on gross receipts would mean generation charges are subject to VAT when billed to distribution utilities and are subject to another round of VAT when billed to customers.
Devanadera said that the BIR’s interpretation can provide a reduction of seven percent in electricity bills.
Citing a Php16,000 monthly MERALCO billing, around Php1,700 represents the VAT, based on BIR rules. A billing statement that only covers the VAT for distribution charges would only be between Php400 and Php600, Devanadera said.