Marcoleta renews push to scrap 12% VAT on electricity

Senator Rodante Marcoleta on Wednesday renewed his call for urgent legislative action to lower electricity costs, urging the removal of the 12% Value Added Tax (VAT) on power and the expansion of government subsidies for low-income consumers.

During the Commission on Appointments hearing on the ad interim appointment of Department of Energy (DOE) Secretary Sharon Garin, Marcoleta directly asked the Cabinet official whether she supports scrapping the VAT on electricity, a move he believes will significantly ease the financial burden on households and boost economic productivity.

“Any measure that will lower electricity rates, we will support,” Garin replied, while noting that the proposal would require input from the Department of Finance (DOF).

“That's also subject to the DOF's opinion, but as our mandate is to have affordable electricity, then we will support,” she added.

Marcoleta stressed that abolishing VAT on electricity would not only cut household bills, but also bring down the cost of goods and services, pointing to the Philippines’ globally high power rates.

He highlighted that in countries where electricity is more affordable, governments actively subsidize energy costs — a contrast to the Philippines, where the power sector remains heavily taxed.

“Isipin po n'yo ang mga cement plant natin, 70% ng kanyang production cost, elektrisidad po. Yung ice plants and cold storage, 60% ng production cost, elektrisidad. Kaya kapag bumaba ang kuryente, pag tinanggal natin ang 12% VAT, talagang magiging maligaya po, hindi lang ang ating mga households pati ang ating mga businessmen (Think about it, electricity takes up 70% of the production cost of cement companies, and 60% of cold storage facilities. Scrapping the 12% VAT will benefit both households and businesses),” Marcoleta stressed.

Beyond tax reforms, the senator also pushed for a major overhaul of how government assistance is delivered. He proposed redirecting a portion of the P194 billion earmarked in the 2025 national budget for various social aid programs toward directly subsidizing the electricity bills of poor households consuming up to 234 kilowatt-hours (kWh) per month.

Programs such as the Pantawid Pamilyang Pilipino Program (4Ps), AKAP, AICS, TUPAD, and MAIP currently account for a large chunk of government aid, Marcoleta noted, but he questioned the efficiency and transparency of their implementation.

“Why not use part of that amount to directly subsidize electricity? It will only cost around P100 billion to cover households consuming up to 234 kWh monthly. That’s more cost-effective than spreading P194 billion across loosely monitored programs,” he argued.

Marcoleta also criticized the current lifeline subsidy scheme, which only benefits consumers using up to 20 kWh a month — a level he called “impractical.”

“That’s barely enough to keep the lights on for a day. We need a realistic threshold if we want real impact,” he said.

Marcoleta shared that even Finance Secretary Ralph Recto has expressed openness to the proposal, describing it as a cleaner, more direct form of assistance that would minimize opportunities for corruption and political posturing.

“Sec. Recto agreed that we should change the system — give direct subsidies instead. Cover all households consuming up to 234 kWh. No middlemen, no grandstanding,” Marcoleta said.

Marcoleta is the principal author of two related bills—Senate Bill No. 61, which seeks to remove the 12% VAT on electricity, and Senate Bill No. 63, which aims to amend the 25-year-old Electric Power Industry Reform Act (EPIRA) to expand the coverage of the lifeline rate subsidy

Both bills are pending in the Senate and, if passed, are expected to provide substantial relief to Filipino consumers amid rising living costs and power rates.