Bill seeks to lift 12% VAT on electricity losses

MANILA, Philippines — Millions of users of electricity are required under the Electric Power Industry Reform Act (Epira) of 2001 to pay tens of billions in charges for so-called system losses or power that is stolen, pilfered or lost through other causes like weather and transmission inefficiency.

The law also requires consumers to pay the 12-percent value added tax (VAT) on those losses.

That levy would soon be scrapped if a bill the House has approved on second reading becomes a law.

“This is a positive development, especially since prices of basic commodities and services like electricity are skyrocketing. If enacted, this bill would give a welcome relief to consumers,” Bayan Muna Rep. Carlos Zarate, author of the approved bill, said yesterday.

He said if Congress could not spare consumers from paying for electricity that is stolen or lost and therefore they do not use, “we should at least remove the VAT on system loss charges.”

“This bill seeks to address the injustice in charging and taxing consumers for something that they do not use. Billing customers for system loss charges is highway robbery. With VAT, it is double robbery,” he said.

Since VAT is a consumption tax, it should not be imposed on something that is not used or consumed, he added.

Citing studies, Zarate estimates that eight percent of a household’s monthly electricity bill accounts for system loss charges.

That is the amount that would be exempt from VAT if the bill were enacted, he said.

Other lawmakers, including Tobias Tiangco of Navotas, have batted for amending the law to spare people from being billed for system losses.

Tiangco said it is not right that the public pays for electricity that is stolen or lost due to weather and other causes.

“This is outrageous. What is worse and more outrageous is that the law authorizes the imposition of VAT on system loss charges,” he said.

“System loss is due to pilferage and inefficient transmission, both of which should be the responsibility of the power distributor or cooperative. We should not let customers suffer for the crime or the incompetence of others,” he said. 

While the House committee on energy chaired by Marinduque Rep. Lord Allan Jay Velasco endorsed the removal of VAT on system loss charges, it has not supported Tiangco’s proposal to scrap those charges.