Lawmaker files measure to reduce electricity cost

By Jess Diaz (The Philippine Star) Updated September 22, 2011 12:00 AM


MANILA, Philippines - Isabela Rep. Giorgidi Aggabao has filed a bill that seeks to reduce the cost of electricity by restoring the three-percent franchise tax on power distributors.


Cagayan de Oro City Rep. Rufus Rodriguez earlier introduced a similar measure.


Under both proposed laws, the three-percent franchise tax would replace the 12-percent value added tax and all other national and local impositions being paid by electricity distributors.


Aggabao said proposals to return to the old franchise tax would reduce the cost of power on the part of consumers as the levy is a direct tax that cannot be passed on to consumers. “The tax incident lies exclusively on the distribution utilities that cannot be devolved,” he said.


He said the Electric Power Industry Act of 2001 (EPIRA) has not served to lower the cost of electricity nationwide contrary to the expectations fo the consumers.


“Today, the Philippines has acquired the dubious distinction of having the highest power rate in the region, even surpassing Japan. One chief reason for this is the tax component of the power rate,” he added.


Aggabao pointed out that the value-added tax, collected pursuant to Republic Act 9337 or the Reformed VAT Law, has increased the cost of electricity by 12 percent with the tax being borne wholly by the consumer.


“This is lawfully permissible because the VAT, by its nature, is a pass-on indirect tax. Thus, the VAT on generation, transmission and distribution charges are shifted to consumers as a matter of course,” he said.


Under his bill, power distributors would pay the three-percent franchise tax based on gross receipts derived from the distribution business.


Aggabao said the tax rate of three percent of gross receipts is reasonable and should be adequate to compensate for the revenue loss of the government, as a result of foregoing the VAT on distribution charges.


The bill provides further that the following shall not form part of gross receipts in the computation of the franchise tax: System loss being charged on the sale of electricity by generation, transmission, and distribution companies; sale of electricity to marginalized consumers whose monthly electric consumption does not exceed 100 kilowatt hours; lifeline subsidy charge paid by non-life consumers on the sale of electricity by distribution utilities; generation charge; transmission charge; and universal charge.