Bill filed to remove VAT on system loss charges

A bill seeking to remove the value-added tax (VAT) on system loss charges in electricity bills has been filed in the Senate.

Risa Hontiveros on Monday filed Senate Bill No. 2076, which aims to amend the National Internal Revenue Code (NIRC) to exempt system loss charges from VAT, amid reports of higher electricity costs during the dry season.

“Itong VAT sa systems loss ay dobleng pasakit at insulto: Pinagbabayad na nga tayo ng systems loss na hindi natin napakinabangan, tapos pagbabayarin pa tayo ng buwis dito,” Hontiveros said.

(The VAT on system loss is a double burden and an insult: consumers are made to pay for system losses they did not benefit from, and are then taxed for it.)

“We must immediately end this unfair arrangement, especially now that electricity costs are rising,” she added.

Under the bill, system loss refers to “the difference between the electrical energy delivered to the distribution system (energy input) and the energy delivered to residential consumers (energy output).”

Hontiveros argued that VAT, being a consumption tax on goods and services, should not be imposed on system loss charges.

“System loss charges—representing losses in the distribution and delivery of electricity—are neither goods nor services purchased by consumers. Families paying for electricity should not be charged VAT,” she said.

“By removing the VAT on system loss charges, we are not only making tax policy more fair and just, but also providing immediate relief to consumers facing higher electricity bills this summer,” she added.

Several lawmakers from both the Senate and the House of Representatives have also called for a review of existing policies on electricity subsidies following complaints over rising power bills.—MCG, GMA News