Ecozone firms exempted from 2% power tax

Export-oriented firms located in the country’s economic zones will be exempted from paying the two percent power distribution franchise tax in their electric bills.

This was announced yesterday by Trade and Industry Secretary Cesar V. Purisima, who explained that the move is intended to lower the cost of electricity to ecozone locators who have been complaining about the high power cost in the country.

The Philippine Economic Zone Authority (PEZA) has issued a memorandum circular informing its registered economic zone enterprises that they will be exempted from the power distribution franchise tax collected by the power distribution utilities pursuant to the provision of the Special Economic Zone Act of 1995 as amended by the National Internal Revenue Code.

Purisima acknowledged that electricity is a major cost component in the operations of many export-oriented firms. The government, thus, "has reduced a substantial amount of this cost so that the export-oriented firms can be competitive with their ASEAN neighbors," Purisima said.

He pointed out that the semiconductor and electronics industry for instance accounts for more than half of the country’s export revenues.

Thus, he pointed out "this reduction will enable them to offer competitive prices for their products and rationalize their operations."

"Moreover," by reducing operation costs, we are making the country an attractive site for off-shore manufacturing," Purisma added.

The reduction was a result of a memorandum of agreement signed by the Energy Regulatory Commission (ERC) and PEZA requiring power generating firms that would exclusively supply power to the country’s ecozones to register with PEZA.

Purisima assured that the DTI, PEZA and the Department of Energy are further studying measures to reduce electricity rates.