MANILA, Philippines — The Bureau of Internal Revenue (BIR) is preparing to scrap the 12-percent value added tax (VAT) on allowable system loss charges, a move that could lower electricity bills.
In a statement yesterday, the BIR said it would issue a Revenue Memorandum Circular after the lapse of 15 days from the publication of the Energy Regulatory Commission (ERC)’s Resolution 26.
The resolution classifies system loss charge as a government-mandated pass-through cost.
“When there is a clear basis under the law to provide tax relief, we should act on it,” BIR Commissioner Charlito Martin Mendoza said amid public clamor to reduce the cost of electricity.
“We are preparing the BIR issuance so that after the required period has lapsed, we can immediately implement the VAT removal and pass the benefit on to electricity consumers,” Mendoza added.
System loss refers to electricity that has been generated and paid for, but is physically lost during the distribution of power before reaching end-users.
Finance Secretary Frederick Go earlier estimated that the move could cost the government around P10 billion a year in forgone revenue.