Government to lose P28B from power sector tax perk bill – Teves

Government stands to lose billions of pesos in annual revenues once a bill that seeks to extend a controversial tax privilege to the entire electric power industry is passed by Congress, Negros Oriental Rep. Herminio Teves warned over the weekend.

House Bill 4847, which seeks to extend the value-added tax (VAT) zero-rated privileged to firms engaged in the transmission and distribution of electricity, would deprive government of at least P28 billion in revenue each year, according to Teves, House ways and means committee senior vice chair.

At present, independent power producers (IPPs), or firms engaged in generating electricity, are already enjoying the controversial tax privilege, which not only exempts them from paying the 10-percent VAT on electricity sales, but also allows them to claim VAT credits from purchases.

The tax privilege of IPPs became controversial after Teves revealed that it was merely inserted during the bicameral conference committee on the bill that later became the Electricity Power Industry Reform Act of 2001.

Teves then had called the privilege "illegal and unconstitutional," and accused the Senate-House conference panel of "usurping the sole authority of the House of Representatives" to initiate tax measures.

The House energy committee recently tried to have HB 4847 calendared for floor debate and approval without the benefit of scrutiny by the chamber’s ways and means panel, which is supposed to screen tax and other bills with revenue implications.

The estimated potential VAT losses as a result of the bill were computed based on the annual sales of firms engaged in collecting and distributing electricity. Some P288 billion worth of electricity is being collected and distributed nationwide each year.

In the case of the Manila Electric Co. alone, government stands to lose some P10 billion from the estimated P100 billion worth of electricity that it sells in Metro Manila and outlying areas, Teves said.

Teves warned that broadening the coverage of the VAT-zero rated privilege would only boost the profit margins of electricity distributors at the expense of the National Treasury.

Besides Meralco, the other large electric power distributors that stand to reap a windfall from once HB 4847 is enacted are the Visayan Electric Co. Inc., Davao Light and Power Co. Inc., Cagayan Electric Power and Light Co. Inc., Angeles Electric Corp., San Fernando Electric Light and Power Co. Inc., Dagupan Electric Corp., Tarlac Electric Inc., and Mactan Electric Co Inc., all of which are in the country’s top 1,000 corporations.