MAP urges gov’t to reconsider harmonized taxes on power

MANILA, Philippines - The Management Association of the Philippines (MAP) has urged the government to revisit the recommendation of the United States Agency for International Development (USAID) to harmonize taxes on power.

USAID earlier recommended the harmonization of taxes on power, which it said account for P0.35 per kilowatt-hour to P2.75 per kwh of the total power cost.

MAP, in a joint position paper, is urging the government to remove the value-added tax (VAT) on power, saying this would reduce electricity tariffs by 7.5 percent to 8.1 percent.

It said the lowering of the VAT to six percent from 12 percent, meanwhile, would effectively reduce tariffs by 3.7 percent for residential and commercial users, and 3.3 percent for industrial users.

MAP said a three percent franchise tax on gross distribution income could replace all applicable taxes.

The three percent franchise tax is applied on sum of distribution, supply, metering, and system loss components.

“This proposal effectively lowers the tariffs by 7.5 percent to 7.7 percent,” MAP said.

The group has joined the growing clamor of business groups for the government to improve the implementation of the Electric Power Industry Reform Act of 2001, the power reform law.

“International and local investors and financial institutions won’t invest in an industry where the rules are not known and stable. The national government should announce now that EPIRA will not be amended, as amendment will not solve the present problem and the government should increase dialogue with industry participants to reduce key uncertainties or changing material rules downstream,” business groups said in a separate joint position paper.

In the joint position paper, the groups instead pushed for the fiscal independence of the Energy Regulatory Commission (ERC).

MAP committee on energy chairman Ernie Pantangco said the basis for recent changes in the Wholesale Electricity Spot Market (WESM) prices was unclear as well as the imposition of a the P32 price cap at the spot market.

“This was done without public consultation,” he noted.

Various groups have submitted proposals to amend the EPIRA, alleging that the law failed to stop skyrocketing electricity rates.