Senate urges removal of VAT on residential electricity

MANILA – Senator Bam Aquino has urged the government to consider removing the 12 percent value-added tax (VAT) on residential electricity to help lower power bills for Filipino households.

Aquino said exempting residential electricity from VAT could provide greater relief to consumers, particularly if coupled with efforts to remove system loss charges, which account for around 5 percent to 6 percent of electricity charges.

"Kung tatanggalin po iyong VAT sa kuryente ng mga residential – hindi po mga negosyo, mga factory (If we remove VAT from residential electricity – not from businesses and factories) but just residential – this could mean a bigger drop in the electricity bill of our citizens," a statement on Wednesday quoted Aquino as saying during the recent Development Budget Coordination Committee (DBCC) briefing.

Aquino has filed Senate Bill No. 266, which seeks to exempt from VAT the sale of electricity by generation, transmission and distribution companies, as well as electric cooperatives.

The measure also seeks to exempt from VAT the services of franchise grantees of electric utilities.

Aquino said removing the tax would help reduce electricity prices by eliminating the VAT burden passed on to consumers.

Aside from the proposed VAT exemption on residential electricity, Aquino has also filed Senate Bill No. 2047, which seeks to reduce the VAT rate from 12 percent to 10 percent on goods and services, including petroleum products.

Aquino also filed Resolution No. 375 calling for a legislative inquiry into Manila Electric Company's (Meralco) recent power rate increase, particularly on why middle-class consumers were made to shoulder electricity subsidies for low-income households, including the financing of the lifeline rate subsidy and other mandated electricity discounts.

Aquino is seeking a formal inquiry into the "cross-subsidy" system, which he described as a mechanism reflected in monthly electricity bills wherein non-beneficiary households shoulder the cost of discounts granted to marginalized sectors and senior citizens.

At present, the system results in an additional charge of PHP 20 to PHP 100 per month for the average family, Aquino said.

He said that while supporting the poorest of the poor remains a national priority, the financial burden should be shouldered by the government through the national budget rather than passed on to the electricity bills of other struggling Filipinos. (Leonel Abasola/PNA)