Osmeña wants electricity exempted from VAT

MANILA, Philippines - Sen. Sergio Osmeña III wants electricity to be exempted from value added tax under a proposed measure that will amend the National Internal Revenue Code of 1997 and the Reformed VAT Law.

He said the move aims to ease the burden of the public in paying high electricity rates in the country.

“VAT on electricity is another burden on the already over-taxed shoulders of our people, especially those whose incomes are barely enough to cover their basic needs. Thus, in light of the unabated price increases in fuel, food and other commodities, Congress is duty-bound to find ways of providing economic relief for the Filipino people,” Osmeña said in the explanatory note of his Senate Bill 2714.

Apart from this, Osmeña also proposed the exemption from VAT on the services of franchise grantees or electric utilities; and the sale or importation of machineries and equipment, including spare parts, to be directly used by the buyer or importer himself in the generation, transmission and distribution of electricity.

Osmeña, chairman of the Senate committee on energy, noted that the Philippines has one of the highest costs of electricity in Southeast Asia. He cited, for instance, the February 2015 addition of 5.24 centavos generation charge per kilowatt-hour plus the 12 percent VAT which raised electricity charges by P0.52 per kwh.

For a household consuming 200 kwh of electricity a month, Osmeña said the estimated VAT is P188.55 – an amount substantial to the average working Filipino since the price per kwh can hover from P5.49 to as high as P12.10.

“What is worse, VAT is not only imposed on the generation of consumed power, it is also felt in transmission and system loss charges, among others. Thus, when it comes to electricity cost, Filipinos suffer most than those in Southeast Asia,” he added.

Osmeña urged his colleagues from the Senate and the House of Representatives to act with dispatch to approve the measure since it “constitutes an invaluable economic relief for all Filipino households and businesses.”

With regard to the foregone revenue that may be suffered by the government, the senator said this can be offset by the increased purchasing power of all household and businesses.

“The resulting cheaper production costs will then parlay to a more robust and equitable economy for the country,” he said.