P187 billion revenue losses seen if utilities VAT removed

MANILA, Philippines — Removing the value-added tax on utilities will deprive the government of at least P187 billion in revenues, House committee on ways and means chair Joey Salceda said yesterday.

“It will cost a total of at least P187 billion in forgone revenues, and that will certainly hamper our fiscal and economic recovery efforts, without a corresponding or equivalent revenue measure to make up for it,” Salceda said.

On Thursday, Salceda revealed that President Marcos has asked the House leadership to waive VAT on electricity and road tolls to ease the impact of soaring prices and interest rates.

“I am generally lukewarm to the idea of revenue-negative measures given our fiscal space,” said Salceda, representative of the 2nd District of Albay.

He said such scenario could result in credit rating downgrade and would “throw a wrench in the exceptional economic growth the Marcos administration is poised to achieve this year.”

The lawmaker said his committee is under instructions from administration officials to study the measure, “along with other alternatives, with a host of other options, including a cap on systems losses, energy efficiency measures, targeted subsidies, among others.”

“The idea is we come up with the best option that costs the government less and actually reduces the water and electricity bill,” he added.

He cited the approach taken by Manila Water Co. Inc. and Maynilad Water Services “where their franchise effectively exempted consumer bills from VAT without exempting the companies from input VAT.”

The lawmaker said the companies were also subject to franchise tax, which meant they paid roughly the same amount of taxes while also reducing consumer bill.

While this has reduced profits for these companies, they cannot pass on their input VAT to consumers, he said.

“The point is, somebody else has to pay, when we reduce another sector’s tax bill. That’s why we are closely studying all options, so that we arrive at a fair solution,” he added.

Party-list Representatives France Castro of ACT Teachers, Arlene Brosas of Gabriela and Raoul Manuel of Kabataan are also pushing for the removal of such taxes amid the rising prices of commodities and services.

Castro said economic experts do not see inflation going down anytime soon.

“In fact, some are expecting the economic situation in our country to get even worse. The Marcos administration must do something to ease the rising prices of basic goods,” she pointed out.