VECO wants public to pay P5M more in franchise tax

CEBU, Philippines - The Visayan Electric Company is asking the Energy Regulatory Commission to allow it to collect an additional P5 million in franchise tax payments from its consumers.

The amount represents the difference between what it pays to the Capitol as franchise tax with what it collected from its customers from 2009 to 2014.

VECO has been paying Cebu Province a franchise tax of 55 percent of one percent during the same period, but it was only allowed to recover the said tax from its consumers at 50 percent of one percent, or a difference of P5,085,893.

In a six-page petition through Atty. Pablo John Garcia, VECO is requesting the ERC to issue an order granting them the authority to collect from their customers the said amount.

 “It is respectfully prayed that the Honorable Commission issue an order granting applicant, VECO, the authority to collect or recover from its end-users in the Province of Cebu, through automatic recovery scheme, the total amount of P5,085,893.48, representing the difference between the amount of local franchise tax that VECO has paid to and the amount of local franchise tax collected from its end-users from 2009 to 2014, over a period of twenty four months, or at the estimated rate of Php 0.0090/kWh,” the petition reads.

VECO is a duly authorized distribution utility providing electric light and power distribution service in Cebu, including Cebu City.   On September 2008, the Cebu Provincial Board has promulgated Provincial Ordinance No.2008-10 or the “Revenue Code of Cebu of 2008.”

Section 117 of the said ordinance states that the local franchise tax imposed is at the rate of 55 percent of 1 percent on the gross receipts which shall include both cash sales and sales on account realized during the preceding calendar year within the jurisdiction of the province.  Garcia, in the petition, said that VECO has been paying local franchise taxes to the province at the previous rate of .500 percent based on gross receipts before the P.0. 2008-10 took effect in 2009.

“From the time that the Provincial Ordinance became effective in 2009 up until 2014, Veco has been remitting franchise taxes at the increased rate of 55 percent of 1 percent on the gross receipts. VECO, in compliance with ERC Case Nos. 2001-891 and 2002-06, has only been recovering local franchise tax payments at the previous rate of .500 percent during the same time period,” the petition reads.

VECO has paid the province over P55.9 million in local franchise tax.   However, it has only recovered P50.8 million covering the years of 2009 to 2014. It needs to recover a total of P5,085,893.48 for the same period, it said.

Further cited in the petition is ERC Case No. 2004-11 in which the Commission recognized that any national or local franchise tax rates are billed to the end-users by the distribution utilities as pass through charges.

“Thus, distribution utilities should neither earn any additional revenue nor incur any additional cost from the imposition of these taxes,” it said.

VECO’s petition has been passed on to the Cebu City Council.  It was referred to the council’s committee on utilities and to the City Legal Office for comments and recommendations, considering that the matter would affect the residents of the city.  (FREEMAN)