Lawmakers filed measures seeking to cut the value-added tax (VAT) collected on the unpopular system loss charge in power bills, in a move aimed at easing what is widely seen as a burdensome levy.
Senior Deputy Speaker Ferdinand Hernandez and Marikina Rep. Miro Quimbo, who heads the House ways and means committee, filed on Tuesday House Bill No. 10602, which seeks to exempt consumers from paying 12% VAT for electricity lost during delivery.
‘Removing the VAT on system loss charges is a straightforward way of lowering electricity bills today,’ Quimbo said in a statement on Wednesday. ‘As Congress continues to fine-tune longer-term reforms, we can already correct on clear inequity: consumers should not be taxed on electricity they never actually consumed.’
The proposal to ease charges in power bills comes after President Ferdinand Marcos, Jr. urged Congress to explore ways to make electricity cheaper, including scrapping the system loss fee – a charge on the difference between electricity produced and consumed paid for by end-users – and its accompanying tax.
Electricity bills in the Philippines carry multiple charges, from generation and transmission to levies subsidizing green energy projects. The add-ons have fueled discontent among Filipinos, with sentiment that they are being charged indiscriminately.
Hernandez and Quimbo said in the bill’s note that ‘consumers have no control over system losses, yet they are made to bear not only the cost of such losses but also the tax imposed on them.’
They said that taxing consumers on system loss ‘runs contrary’ to the principle that VAT should only apply to goods and services they directly benefit from. ‘Imposing VAT on such products effectively taxes consumers on electricity they never actually consumed.’
‘VAT-free electricity’
Also on Tuesday, Navotas Rep. Toby Tiangco filed a broader measure seeking to exempt households consuming less than 400 kilowatt-hours (kWh) of electricity a month from VAT on power bills.
In House Bill No. 10548, he said expanding the tax cut to cover entire power bills would help households free up more of their budget for essentials such as food, education, transportation and healthcare.
‘Electricity is not a luxury – it is a basic necessity. Every peso a family saves on its electricity bill is another peso they can use to put food on the table, buy medicines, pay for school expenses, or simply make ends meet,’ he said in a separate Wednesday statement.
The government already runs a ‘Lifeline Program’ for indigent Filipinos granting sweeping discounts to households below certain consumption thresholds. In Metro Manila, those using less than 50 kwH a month pay no electricity, while those consuming 71 to 100 kWh get a 20 percent discount.
Tiangco said his bill acknowledges the subsidized electricity program for indigents, though noted that ‘many middle-income Filipino families have been left to absorb the steady increase in electricity costs despite facing the same economic pressures.’