House bill seeks to remove 12% VAT on system loss charges for electric bills

House leaders on Wednesday filed a bill removing the 12% Value Added Tax dues on system loss charges on certain conditions, a measure that President Ferdinand Marcos Jr. wished for Congress to pass during the Chief Executive’s fifth State of the Nation Address (SONA last month.

House ways and means panel chairperson Romero Quimbo of Marikina and Senior Deputy Speaker Ferdinand Hernandez of South Cotabato filed House Bill 10602 which provides that the 12% VAT on system loss will be removed on all recoverable distribution system loss charges reflected in electricity bills approved by the state-run Energy Regulatory Commission (ERC).

In a statement, Quimbo said the removal of VAT on system loss charges will reduce electricity costs for Filipinos while also recognizing the realities faced by the country’s power distribution sector.

“Everyone agrees that consumers deserve lower electricity bills. Removing the VAT on system loss charges is a straightforward way of lowering electricity bills today. The question is how we provide that relief without unintentionally weakening smaller electric utilities and cooperatives that keep the lights on, particularly in far-flung communities,” Quimbo said.

“VAT is a tax imposed whenever value is added to consumption. Since it is not consumed by the consumer, no value is added, and therefore VAT should not imposed. As Congress continues to fine-tune longer-term reforms, we can already correct one clear inequity: consumers should not be taxed on electricity they never actually consumed,” Quimbo added.

Quimbo’s panel is scheduled to hear bills scrapping VAT on systems loss charges today, August 5, at 10 am.

Speaker Faustino “Bojie” Dy III of Isabela and Majority Leader Ferdinand Alexander “Sandro” Marcos of Ilocos Norte earlier filed House Bill No. 10430 which seeks to remove recoverable system loss charges under the Electric Power Industry Reform Act (EPIRA). — Llanesca T. Panti/RSJ, GMA News