Coal tax revenue to reach P2 billion next year—DOF

Published December 18, 2017, 10:00 PM By Chino S. Leyco

https://business.mb.com.ph/2017/12/18/coal-tax-revenue-to-reach-p2-billion-next-year-dof/

The forthcoming hike in coal tax is expected to raise government revenue by more than sixfold next year while its impact on electricity cost should be insignificant, the Department of Finance (DOF) said.

Based on estimates by the DOF, excise tax collection from coal would increase from only P300 million to P2 billion next year, while households consuming P1,500 of electricity per month will see a rise in power bill by only P8.

Finance Undersecretary Karl Kendrick T. Chau said that 80 percent of the country’s coal consumption goes to power producers, 15 percent to cement manufacturers, while the remaining five percent is to industry.

For his part, Finance Secretary Carlos G. Dominguez III said that the increase in coal tax should not be a threat to ordinary consumers and the manufacturing sector’s potential for expansion.

Trade Secretary Ramon Lopez earlier warned the impending hike in coal excise tax is threatening the country’s accelerated manufacturing growth target of over 10 percent next year,

Lopez said achieving the target would be “challenging” once the coal tax under the Tax Reform for Acceleration and Inclusion Act (TRAIN) be implemented.

But Dominguez said locally produced coal will remain exempted from value-added tax (VAT) but be subject to excise levy.

Dominguez said that what Congress decided during the bicameral conference committee meetings is to keep the 12 percent VAT exception being enjoyed by all coal mines in the Philippines.

“We had extensive discussion on that with them. Well, what is already passed by both Houses [of Congress] — in the version that was ratified by both houses — the VAT on domestic coal production is exempt,” Dominguez said.

But the finance chief said that beginning January next year, all coal producers, both local and foreign, will have to pay excise taxes to the government.

Under the Bicam-approved tax reform bill, coal excise tax rate will be raised from the current P10 per metric ton to P50 per metric ton in the first year of implementation, P100 in the second year, and P150 in the third and succeeding years.

The R10 coal excise tax rate has remained unchanged since 1988 while the local industry has been exempted from paying excise tax since 1976.

The increase the coal taxes was among the provisions that were not part of the original DOF’s first tax reform proposal.

Dominguez earlier admitted that they accommodated a number of other provisions that lawmakers wanted to include in the first Tax Reform for Acceleration and Inclusion (TRAIN) bill.

Among the provisions that were not originally proposed by the DOF, but inserted in the final TRAIN bill, include the increase in excise taxes on coal, minerals, tobacco, and the introduction of a cosmetic levy.

“We did not propose it in Package One. However, we respect the right of the legislature to introduce taxes as they see fit, it’s part of the law and we accept that,” Dominguez told reporters in a recent interview.

The increase in coal tax was originally planned for the DOF’s tax reform package five.

Asked if the insertion of the coal tax could pose a legal question later on as this provision did not originate from the lower House, Dominguez said the levy is not considered a new tax, saying the Bicam only adjusted the three-decade old coal tax rate.

“That issue was never brought up and besides it’s not a new tax. Coal is currently taxed at P10 per metric ton so it is actually only adjustment of a tax already existing,” Dominguez said.

“I think what that [Constitution] refers to is a totally new tax cannot be introduced other than by the House of Representatives, however, if the tax already exists, they can adjust it,” he added.