Reduced VAT on electricity pushed

A party-list lawmaker has filed a bill seeking to slash the value-added tax on electricity in half to provide relief for consumers facing some of the highest power rates in Asia.

Representative Nathan Oducado of 1Tahanan Party-list filed House Bill 6984, which proposes amending the National Internal Revenue Code to reduce the VAT on electricity from 12 to 6 percent. The reduction would apply to charges passed on to consumers by distribution utilities and electric cooperatives.

Oducado cited research from Ateneo de Manila University indicating that taxation is a key factor in making Philippine electricity rates the third-highest in Asia, trailing only Singapore and Japan.

"These factors not only cause distress among ordinary Filipinos, they also make starting a business or investing in the Philippines costlier than it has to be," Oducado said.

The lawmaker acknowledged that while a total VAT removal would cost the government approximately P187 billion annually, the proposed 50 percent reduction would have a smaller fiscal impact of P93.5 billion.

For an average household consuming 200 kWh per month, Oducado estimated the measure would save about P130 monthly, or P1,560 per year.

The bill includes a "mandatory pass-through" provision to ensure the tax savings reach consumer bills. It tasks the Energy Regulatory Commission, in coordination with the Department of Energy and the Department of Finance, to monitor compliance and submit quarterly reports to Congress.

The measure also requires a comprehensive assessment two years after its implementation to determine if a full VAT exemption is feasible.

Business groups, including the Philippine Chamber of Commerce and Industry and the Philippine Exporters Confederation Inc., have previously expressed support for lower electricity taxes to improve the country's investment climate and support job creation.