Senate bill seeks to cut VAT from system loss charges in electric bill
A bill has been filed in the Senate seeking to remove the value-added tax from system loss charges in the electricity bill.
On May 4, Sen. Risa Hontiveros shared that she lodged Senate Bill No. 2076.
"Itong VAT sa systems loss ay dobleng pasakit at insulto: Pinagbabayad na nga tayo ng systems loss na hindi natin napakinabangan, tapos pagbabayarin pa tayo ng buwis dito," she wrote on Facebook. "We must immediately end this unfair agreement, especially now that electricity costs are going up."
The proposal seeks to amend Section 109 of the National Internal Revenue Code of 1997 to include an additional subsection under transactions exempt from VAT.
It will read: "The Energy Regulatory Commission shall ensure that the reduction arising out of this exemption shall not be passed on to the residential household consumers through distribution wheeling charges or other pass-through components."
System loss is defined by the measure as the difference between the electric energy delivered to the distribution system (energy input) and the energy delivered to the residential household consumers (energy output).
In 2022, the ERC put an 8.25% cap on system loss charges.
Hontiveros said that the bill is part of her planned measures to provide assistance to consumers, especially those from low-income households, amid rising energy costs.
During a press conference on Monday, Energy Secretary Sharon Garin said that the Department of Energy backs 12% VAT removal on components of electricity bills.
"Anything that would lower the price of electricity, the DOE supports," she said.
"However, that decision on whether the suspension, removal, or imposition of any tax measure is under the mandate of the Department of Finance."
Meralco said in March that power rates would increase in March due to higher transmission and generation charges. Meralco vice president and head of corporate communications Joe Zaldarriaga warned electricity charges could climb even higher due to the global oil crisis brought on by the Middle East conflict.