Wednesday, November 14, 2007 Higher power rates feared in Mexico By Albert B. Lacanlale
MEXICO -- Residents in this town might be burdened with higher electric bills should the government push through in requiring power cooperatives to pay local taxes such as franchise tax, among other charges.
It is in this light that a power cooperative here has asked the Municipal Government last week to grant it more time before being required to pay various taxes to the town coffers.
"We are seeking for tax exemption privileges in order not to pass on the burden of higher rates being charged to consumers of the imposition of taxes," said Loliano Allas, general manager of the Pampanga Electric Cooperative (Pelco 1), in a letter sent to Mexico Mayor Teddy Tumang last week.
Allas's request came after the Department of Finance (DOF) issued a circular prescribing the guidelines on the powers of local government units (LGUs) to impose franchise taxes and other fees on electric cooperatives (ECs) registered, supervised, and controlled by the National Electrification Administration (NEA).
For 30 years from its organization or conversion, a power cooperative is exempt from paying franchise tax, value-added tax, the three-percent percentage tax, and other taxes except for income tax that is perpetually waived. An electric cooperative that has reached 30 years but still has debts to settle may be granted extension of the exemption.
Pelco 1, probably the best performing power cooperatives in Pampanga, has reached the prescribed 30 years operation and is now required to pay local taxes.
Allas, however, alleged that the non-profit nature and missionary service orientation of Pelco 1, which includes bringing electricity to the rural areas not financially viable, results in lesser revenue.
"Electric rates are just enough to cover actual costs with no margin whatsoever for profit and do not include any cost component to cover the tax being levied," Allas said in one of his letters to the Municipal Government.
Allas said the tax imposed would result in higher rates and would discourage investors and businesses from coming in or even present businesses/investors would move out of the local area whose electricity rates have become too high by reason of tax imposed.
