Paradigm shift on taxation of DUs, gencos needed – Enrile
Gov’t asked to treat electricity as a public service, not as a major revenue source
The Philippine government earns billions and billions of pesos from taxing power utility firms as well as power generation companies when this should not be the case.
According to Senate President Juan Ponce Enrile, “All over the world, public utilities are never sources of revenues for government coffers. In the Philippines, however, the government imposes taxes on public utility firms which are so burdensome that utility firms have no choice but to pass these on to consumers.”
The senator stressed that given the hard times and the decreasing competitiveness of Philippine industries, it is high time that the Philippines emulate other more progressive countries in their treatment of basic needs such as electricity as a public service – not as a major source of revenues.
This, Enrile said, is what his proposed measures currently undergoing Committee deliberation at the Senate aim to achieve – “a paradigm shift that will see Filipinos enjoying electricity more as a public service, not as a public burden.”
Senate bills 3147 or the Uniform Franchise Tax Act and 3148 or the Electricity Rate Reduction Act share the same goal of bringing down costs of electricity in the country.
“Providing cheap electricity to Filipino consumers is a public service – serbisyo publiko, that is why government collects taxes so that they can perform that public service to the people,” said Enrile.
Under SB 3147, Enrile proposes that, in lieu of all taxes, government should instead charge a uniform 3% franchise tax on the distribution income of electric utilities.
Currently, government is charging power utility firms a 12% value added tax (VAT) on top of a 32% corporate income tax, and a local franchise tax imposed on their gross receipts.
Enrile clarified that, contrary to what others believe, this proposed measure will not benefit Meralco or other DUs as most of the taxes are passed-through expenses, with consumers shouldering the additional burden.
On the other hand, SB 3148 aims to bring down government royalties from indigenous energy sources from 60% to 3% of net proceeds of generation companies (Gencos).
The intent of tapping into our very own, natural, or the so-called indigenous energy sources is to have an alternative source to imported fuel. But, as it is, the senator says, indigenous energy resources end up more expensive than imported fuel.
Enrile also pointed out that the 60-40% arrangement between the government and power generation companies enacted by virtue of a presidential decree issued during the Marcos regime was based on a premise that energy coming from the country’s very own natural or indigenous sources will be exported to other countries – not for domestic consumption.
The senator said that, since these indigenous energy resources are, in actuality, being consumed domestically and are not being exported, there is no point in collecting this kind of onerous government royalties under what the senator calls “an anomalous taxation scheme”. In so doing, the senator said, the government is only punishing the Filipino consumers.
Lowering to 3% the 60% government share in Malampaya’s natural gas, for example, will result to lower priced natural gas for power generation companies. What will be saved by these gencos will, for one, be used by the government to remove and assume the cross-subsidy being shouldered by higher income bracket families, or those consuming above 100 kwh electricty per month. This is on top of utilizing these tax savings for the direct benefit of electricity consumers through reductions in the electricity bills they have to pay.
If passed, the proposed twin measures could lower electricity rate by at least P1 for residential users, and between P1.32 to P2 for industrial users.
For a household consuming monthly electricity of a minimum of 100 kilowatt-hours, savings would amount to at least P100. For lifeline users, most especially, this could make a lot of difference as this could be a one-week allowance for one of the children or a one-week supply of rice; for industries consuming thousands of kilowatt-hours of electricity, this could be the salary of one, two, or more workers, said the senator.
“The benefits from the proposed bills far outweigh the revenues that government will lose if the bills are passed,” said Enrile.
“Aside from making industries more competitive, if not making them stand a better chance at surviving the current economic challenges, lowering electricity rates will release substantial amounts of consumer purchasing power. This will translate to jobs preserved or created, continued government revenues from taxes from saved industries, as well as a more robust consumer-driven economy,” the senator said.
