Lawmakers push for exemption of system losses from VAT

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Monday, March 30, 2015

TWO party-list lawmakers are pushing for the exemption of system loss component in the sale of electricity from the expanded Value Added Tax (e-VAT).

Bayan Muna party-list Representative Neri Colmenares and Carlos Isagani Zarate filed House Bill 5543 seeking the exemption of the system loss charge by distribution companies and electric cooperatives from VAT.

The bill aims to bring doing the cost of electricity for consumers.


Colmenares said that the system loss charge comprises about eight percent of the total electricity bill, based on the study of independent think tank Ibon Foundation.

He said this practice of imposing VAT even on pilfered power and electricity used by distribution companies is baseless and "unlawful" because the people are taxed for goods or services they have not actually used.

"The imposition of VAT upon this system loss charge is unfounded and illegal as the people are taxed for goods or services they have not actually consumed," said Colmenares.

Colmenares said that VAT is a form of sales tax and is an indirect tax.

"Being a pass-on tax, the burden of paying the VAT is therefore ultimately left upon the shoulder of the final consumers (which are) the consuming public," he said.

Zarate, for his part, said a study conducted by the International Energy Consultants (IEC), a Perth-based consultancy firm, and commissioned by Meralco showed that the rates in Luzon rank as the ninth highest electricity tariffs among 44 countries surveyed.

Zarate said the primary reason for such higher power rates as compared to those of other countries is the absence of government subsidies for electricity, unlike in countries like Indonesia, Thailand and Malaysia.

He said the governments of the mentioned countries subsidize electricity rates and these subsidies comprise a large part of these countries' public budget. (Sunnex)

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