Coal excise tax a bitter pill to swallow for consumers

Published December 14, 2017, 10:00 PM By Myrna M. Velasco

https://business.mb.com.ph/2017/12/14/coal-excise-tax-a-bitter-pill-to-swallow-for-consumers/

With the Tax Reform for Acceleration and Inclusion (TRAIN) measure now just awaiting the signature of President Rodrigo Duterte, the approved three-tiered increases in coal excise taxes would be a better pill to swallow for Filipino consumers who will eventually bear the brunt of cost impact in their electric bills.

Senate Committee on Energy Chairman Sherwin T. Gatchalian said the excise tax would become a “pass on charge” resulting in additional P13.2-billion electricity costs that consumers inevitably would have to shoulder.”

The lawmaker opposed the excise tax increases for coal, especially when these were contemplated at higher levels of P100, P200 and P300 per metric ton increments. That led to a compromise lower three-tranche excise taxes of P50 per metric ton in 2018, R100 in 2019 and P150 per metric ton in 2020.

Gatchalian anchored his objection to that particular provision on the prospective impact of the tax measure on the power consumers, primarily for areas served by electric cooperatives heavily leaning on coal-generated power supply.

He thus explained that “despite my affirmative vote, I would like to put on record that I still maintain my reservations regarding the massive increase in the excise tax on coal that has made it into the final version of the law for the President’s signature.”

He added that “while proponents of the coal tax increase may downplay it as negligible… Filipinos are already struggling through the pain of paying the highest power rates in Southeast Asia,” hence, the lawmaker averred that supporters “miss the point entirely.”

The propounded hikes in coal excise tax gained resounding support from renewable energy (RE) advocates, and that pitted the clean tech genre again versus coal-fired power facilities, although in reality, these two technologies serve two different critical functions in the country’s power system.

As high electricity costs are still a major dilemma for the Filipino consumers, coal plants have been the “development of choice” by project sponsors for baseload capacity, or the plants that could operate round-the-clock in meeting the country’s energy needs, at a cost deemed cheaper vis-à-vis other technologies.

On the RE space, recent developments were still heavily subsidized to the tune of P26 billion to R28 billion annually on the consumers’ pockets and the generation of some technologies (i.e. wind and solar) still intermittent as battery storage has yet to reach commercial maturity for it to be at competitive price points.

In the Senate energy committee’s simulations, the coal tax upon reaching the P150/MT level would already bear negative implications – that aside from gobbling up on household budgets that should have been allocated better for basic needs, this is also the tipping point that stirs up probability of adversely affecting the competitiveness of various industries operating in the country, primarily the energy-intensive manufacturing sector.

As an example, Gatchalian illustrated that “the tax hike up to P150 after three years will result in average monthly rate increases of P14.348 for a 200-kilowatt-hour household served by 100-percent coal contracted distribution utility. This is equivalent to the price of half a kilogram of rice for 2.7 million households.”

Across administrations in government, the energy sector has always been an easy prey for higher tax enforcements to shore up State revenue collections.