1Tahanan Partylist Representative Cong. Nathan Oducado filed a bill pushing for the reduction of the value added tax on electricity by half, from 12 percent to 6 percent.
Cong. Oducado filed House Bill 6984, which aims to amend the National Internal Revenue Code (NIRC) to reduce the VAT on electricity passed on by distribution utilities like Meralco and electric cooperatives on the consumer.
“According to academic research conducted by Ateneo de Manila University (ADMU), multiple factors including taxation make electricity rates in the country the third-highest in Asia, behind Singapore and Japan,” said Cong. Oducado. “These factors not only cause distress among ordinary Filipinos, it also makes starting a business or investing in the Philippines costlier than it has to be.”
HB 6960 amends Sections 108 and 109 of the NIRC, and includes provisions requiring mandatory pass-through of the VAT reduction to consumer electricity bills. It also tasks the Energy Regulatory Commission (ERC), in coordination with the Department of Energy (DOE) and Department of Finance (DOF), to monitor compliance, issue necessary implementing rules, submit quarterly reports to Congress, and conduct a comprehensive assessment two (2) years after effectivity to determine if the full removal of the VAT is actually feasible.
“A complete VAT removal would cost the government an estimated ₱187 billion annually, whereas a 50% reduction to six percent (6%) VAT would cost ₱93.5 billion,” admitted Oducado. “But to an average household consuming 200 kWh per month, the 50% VAT reduction would already save approximately ₱130 monthly or ₱1,560 per year.”
Cong. Oducado also urged fellow lawmakers to consider the revenue which the VAT reduction would bring by making business transactions in the Philippines less costly and more palatable to investors.
“Business groups such as the Philippine Chamber of Commerce and Industry (PCCI) and the Philippine Exporters Confederation, Inc. have previously expressed support for legislative measures to reduce or exempt VAT on electricity sales,” recalled Cong. Oducado. “Stakeholders agree that cheaper electricity would provide immediate relief to consumers, lower operating costs for businesses, attract investments, and support job creation.”
