Businesses seek policy on taxes covering power system losses

MANILA, Philippines - Philippine industries have sought a clear-cut government policy regarding the exclusion of system losses from value added taxes (VAT) charged on electricity consumption. In a letter addressed to the Bureau of Internal Revenue (BIR) Commissioner Lilia Hefty, Federation of Philippine Industries (FPI) President Jesus Arranza said that the system losses collected by the Manila Electric Co. (Meralco) “not a VAT-able transaction." Citing provisions under the National Internal Revenue Code, Arranza said that the VAT can only be collected from persons “who in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services." Since system losses are either stolen electricity or power dissipated through its transmission, “the end user did not really obtain any good, property, or service," Arranza said. “Since system loss does not fall under any of the VAT-able transactions and VAT-able goods, properties or services, the imposition of VAT on the same is confiscatory. Such confiscatory imposition could very well be considered as a violation of the due process principle because the money of the tax payer is being taken away without any consideration," said Arranza, whose group represents 38 industry associations and 74 individual corporations. FPI added that Meralco and other electric companies collecting payments on system losses already translates into their income “since it is recovered payment on lost electricity." - GMANews.TV