Cutting the value-added tax (VAT) on electricity may offer immediate relief to consumers, but the Department of Energy (DoE) cautioned that the proposal comes with fiscal trade-offs that require careful vetting by economic managers and lawmakers.

In a statement Tuesday, the DoE stressed the need to balance lower power rates with government revenues.

“Any tax measure must be carefully evaluated by the Department of Finance (DoF) and Congress to ensure that lower electricity costs do not undermine the delivery of essential public services,” it said.

Tax policy is under the DoF’s jurisdiction

The DoE said proposals to suspend, reduce, or remove VAT on electricity could ease costs for households and businesses, but stressed that tax policy is under the DoF and the broader economic team.

Instead, the department said it is ready to provide technical input on the potential impact of such measures on the energy sector.

DoE ready to provide technical inputs

“The Department stands ready to provide technical inputs on the energy-sector impact of any proposed measure, in support of a whole-of-government approach that protects both consumer welfare and fiscal sustainability,” it added.

To recall, Senator Risa Hontiveros earlier filed a measure seeking to remove the VAT on system loss charges in electricity bills, amid concerns over rising power costs.

The proposal, Senate Bill No. 2076, aims to amend the National Internal Revenue Code to exempt system loss charges from VAT. The move comes as electricity rates typically increase during the dry season, when demand is higher.

However, the DoE noted that electricity affordability depends on a range of factors — not just possible tax adjustments, but also structural improvements in the power sector.