THE Power Bloc lawmakers, composed of PHILRECA Party-List representative Rep. Presley De Jesus and APEC Party-List representative Rep. Sergio Dagooc, commend the Energy Regulatory Commission (ERC) for heeding their call and protecting Filipino consumers’ interest by suspending the improper passing on of the franchise tax of National Grid Corporation of the Philippines (NGCP).
The ERC revealed its decision to revoke its 2011 order that previously allowed the NGCP to directly pass on their 3% annual franchise tax to consumers, thereby sparing consumers from shouldering these additional costs.
The ERC said that the decision will result in a reduction of around one centavo per kilowatt-hour for the consumers. This action comes as a response to the urgent plea made by the Power Bloc during a roundtable discussion last March 22 with the ERC and the Bureau of Internal Revenue (BIR) for the reversal of the 2011 order.
According to Rep. De Jesus and Rep. Dagooc, it is the NGCP who has the obligation to pay for the franchise tax, not the consumers. During said discussion, they also brought up the issue of multiple taxation in the energy sector and called for the review of Value-Added Tax (VAT) imposition on specific charges, including the franchise tax.
Following the roundtable discussion, the two representatives filed House Resolution No. 1139 on July 26 appealing to the ERC to disallow NGCP from collecting its franchise tax as a passed-on charge.
House Resolution No. 1138 was also filed by the Power Bloc calling for the issuance of an amended format of electricity bills so that subsidies will be excluded from the computation of VAT. Both measures aim to reduce power costs and bring relief to Filipino consumers.
“Our consumers deserve transparency and fairness when it comes to their electricity bills,” Rep. De Jesus said. “The suspension of the passing on of NGCP’s franchise tax will save the consumers billions of pesos that would have otherwise been unfairly charged to them.”
The ERC’s suspension of the passing on of franchise tax marks a significant milestone towards creating a fair and transparent power industry. However, the Power Bloc maintains its position that the current tax structure which subjects consumers to unnecessary VAT charges on subsidies must be resolved by relevant authorities including ERC and BIR.
While applauding the ERC for this immediate action, the Power Bloc representatives continue to call for the refund of NGCP’s franchise tax that had been paid for by the consumers in previous years, comprising of the 3% franchise tax and the 12% VAT imposed on top of it. According to the lawmakers, what has been wrongfully collected must be refunded.
The consumers have been unjustly burdened with these costs for almost a decade, and a prompt refund of these amounts is the next step to rectify such unjust enrichment for NGCP. Based on the data from the Congressional Policy and Budget Research Department of the House of Representatives, around PHP 14.9 billion in franchise tax had been wrongfully passed on by NGCP to consumers from 2011 to 2021. This mere treatment alone of franchise tax as a passed-on charge even created more anomalies. Since the franchise tax formed part of the gross receipts paid for by consumers, it was further subjected to a 12% VAT which amounted to around PHP 1.68 billion from 2011 to 2021. The improper imposition and collection of VAT on the franchise tax must also be recalled and refunded by the BIR by virtue of the same principle.
