PCCI: Defer coal tax to stop power-rate hike

By Elijah Felice Rosales - October 4, 2018

https://businessmirror.com.ph/pcci-defer-coal-tax-to-stop-power-rate-hike/

THE government should defer the scheduled next-round increase on the tax on coal under the Tax Reform for Acceleration and Inclusion (TRAIN) law to prevent power rates from further increasing and creating a dire domino effect on all economic sectors, the country’s largest business network said on Wednesday.

In a statement, the Philippine Chamber of Commerce and Industry (PCCI) said it is looking forward to seeing the government finally pull all the stops to make power cost competitive. The group argued the country is far from being on a par with its fellow Southeast Asian economies in terms of electricity rates.

“The Asean [Association of Southeast Asian Nations] is a dynamic location for investments, and the Philippines is competing for investments in heavy industries, manufacturing and technology against countries like Thailand, Indonesia and Vietnam. The power rates of these countries are significantly lower than that of the Philippines at between P4 to as much as P7 per kilowatt-hour,” the statement read.

The TRAIN law, which took effect on January 1, imposed sequential increases on fuel excise taxes and the coal tax. It has been widely blamed for largely fueling the record inflation from which most economic sectors are now reeling, and which prompted the government to take a range of nontariff measures to stabilize supply and prices of staple foods. The Bangko Sentral ng Pilipinas  also delivered a total 100-basis-point hike in policy rates as an inflation-busting move.

“Competitive power rate has been elusive. Sixteen years into the passage of the Electric Power Industry Reform Act and yet the goal to ensure reliable and affordable power supply has yet to be achieved,” it added.

The PCCI said the government should look closely at proposed legislations that could further power rates. It asserted that “any such attempts should be boldly avoided and rejected.”

The government was also told to remove a number of power charges, as well as halt the scheduled increase on coal tax under the TRAIN, to hold off rate hikes.

“In these concepts, the government must wear a strategic and competitive hat. The government may have to consider subsidy really as an investment, which is designed to produce major returns instead of subsidy as a pure expense and deduction to government income,” the statement read.

“Subsidy may be in the form of tax incentives and removal of pass-through charges and burdensome tariffs, such as VAT on franchise tax, the generation rate adjustment mechanism, feed-in-tariff and others in universal charge, which the government can shoulder using the Malampaya funds. And to stop or defer anything in the pipeline that would result to rate increase, including the scheduled increase on the tax on coal as provided in TRAIN,” it added.

The TRAIN imposed a tax of P50 per metric ton on both local and imported coal starting on January 1. The duty will be increased by P50 every year until January 1, 2020, when the rate peaks at P150 per MT.

Energy one-stop shop

The PCCI also called for the immediate passage of Senate Bill  (SB) 1439, filed by Sen. Sherwin T. Gatchalian, that will create the Energy Virtual One Stop Shop. If passed into law, the proposed agency seeks to cut red tape for new power-generation projects.

SB 1439 is now pending in the House of Representatives.

The PCCI is pushing, too, for the passage of SB 1950, which will reduce electricity rates by allocating net national government share from the Malampaya funds to pay the stranded contract costs and debts of the National Power Corp. The group added the Department of Energy should continue to implement and improve its competitive selection process.

“We are all aware that in most countries, power rate is somehow subsidized in one form or another simply because competitive power rate is the gateway to investments and employment. They have made that decision as a national and quiet strategy, and they are achieving their objectives and winning compared to the Philippines,” the statement read.

The Philippines trailed its Asean neighbors in terms of foreign direct investments with an average of $6.7 billion from 2013 to 2017, the PCCI said, citing figures from the World Bank. This was lower than the FDI average of Indonesia ($19.2 billion), Vietnam ($11.3 billion) Malaysia ($10 billion) and Thailand ($8.24 billion).