Finally, our lawmakers have initiated moves in Congress to do something about that 12 percent revised value added tax (RVAT) being imposed at each and every charge indicated in our monthly electric bills. Pro-administration Senators Juan Ponce-Enrile and Juan Miguel Zubiri have filed separate bills to scrap the EVAT on power. Unfortunately, these two Senate bills won’t move in Congress unless their colleagues in the House of Representatives start the process. Under our Constitution, all tax measures must emanate from the Lower House.
I was glad to hear, though, that no less than the chairman of the House Committee on Ways and Means, Rep. Exequiel Javier has reportedly expressed his intention to file the counterpart measure on the Enrile and Zubiri bills. The twin Senate bills will definitely have smooth sailing at the Senate because the proposed measure was endorsed already by Sen. Francis “Chiz” Escudero who is the chairman of the Senate Ways and Means Committee. The Senate and the House Committees on Ways and Means are the designated bodies that process all proposed tax and tax-related legislations.
In his Senate Bill 1361, Enrile cited that power must be exempted from the coverage of RA 1361 or the RVAT Law to bring down the cost of electricity in the country, now considered one of the highest in Asia. Zubiri, for his part, filed Senate Bill 1977 seeking the return of VAT-exemption for fuel on electricity. A large portion of our electricity generation comes from bunker fuel-fired power plants. Zubiri noted a one peso per unit increase in diesel price and bunker fuel increased generation cost of electricity in the whole country.
Sen. Mar Roxas II filed earlier a bill that seeks to suspend the RVAT on gasoline and other refined oil products which were also previously VAT-exempted. The bills of Enrile and Zubiri, I think, could be the better approach to ease the burden on consumers in general. As I see it, the Roxas bill is a shotgun approach to the problem that would not translate to benefit the majority of consumers because not all of us have cars or motor vehicles.
But Filipinos from all over the country, most of us anyway, are consumers of electricity in our homes except for a few households in far-flung places that are not yet reached by electricity. The high cost of power in the Philippines makes our country less competitive in attracting investments in the manufacturing sector that are energy-intensive. And less investments coming into our country certainly would mean less jobs created and therefore lower income in circulation to spur consumption.
The government reportedly earned as much as P7.62 billion in 2006 from RVAT collections on power, plus an additional P1.23 billion from the lifting of VAT exemption of electric cooperatives. On the other hand, the government estimated that the proposed Roxas bill would cost as much as P50 billion in revenue losses which could otherwise be used to finance socio-economic programs to benefit the people.
Hence, it would be more tolerable for the government to absorb the revenue loss if RVAT on power is scrapped under the proposed bills of Enrile and Zubiri. I have no quarrel with the imposition of the 12 percent RVAT on power and electricity because it is a consumption tax levied across-the-board and hits everyone equally.
What I find most deplorable specifically on the RVAT was the imposition of 12 percent rate in each and every item of the charges billed to us in our monthly electric consumption. If you examine our monthly bills from the Manila Electric Co. (Meralco), you would find these disgusting VAT charges being levied to us itemized in the heading of “government taxes.” You would see it in the “metering information” on the backside of our Meralco bill under the category on VAT charges.
The RVAT is levied on generation charge and another RVAT on transmission charge. Then, we are also being levied 12 percent VAT on “distribution rev & subs,” which I take to mean are the short forms for revenues and subsidies. The subsidy is being shouldered by the big users of electricity as a socialized pricing for the benefit of small consumers. Remember that VAT is a consumption tax or a tax imposed on products we use or consume. If it is a subsidy given by the big electricity users, then it could not possibly be considered a consumption that is taxable. So why in the world are we being levied 12 percent VAT on “distribution rev & subs?”
It gets more disgusting to see in our Meralco bill that we are also levied RVAT for “systems loss” or the electricity loss due to pilferage and other causes being charged to us paying consumers. Thus, long before this proposed measure in Congress came about, I have been strongly advocating the amendment of the RVAT law on this particular score. We can complain and complain until we turn blue but we have been paying this particular item on “systems loss charge” through these past seven years since the passage into law of the Electric Power Industry Reform Act (EPIRA) in 2001. But that is another controversial law that Congress wanted to review.
Amid strong objections by big foreign and local business groups, Pampanga Rep. Juan Miguel “Mikey” Arroyo, son of President Arroyo, has softened his stance over amending the EPIRA, saying he is now open to other options to ensure free competition among power producers and provide the lowest possible cost of electricity for consumers. The young Arroyo is the principal author of House Bill 3124, which seeks to amend EPIRA by allowing “open access and retail competition” but keeping the state-owned National Power Corp. (Napocor) to maintain 50 percent of power plants.
Precisely, the inefficient operations of Napocor are causing much of the burdens on high power rates in our country and therefore the Arroyo bill won’t be the solution to this problem. And hopefully, the four-day summit of all stakeholders in the energy industry that is ongoing right now would be able to take up all these proposed bills in the best possible light, literally or otherwise.