A PHP20 reduction in power consumers’ bill is expected following the removal of the value added tax (VAT) on system loss, Energy Secretary Sharon Garin said Tuesday.
On Monday, the Bureau of Internal Revenue announced the issuance of Memorandum Circular No. 97-2026, which removes the allowable system loss charge, based the cap approved by the Energy Regulatory Commission (ERC), from the government-mandated collections under the gross sales for VAT purposes.
The circular, however, excludes income tax and the corresponding creditable withholding tax
“The DOE welcomes the BIR (Bureau of Internal Revenue) (decision). This (is) under the Department of Finance. This is not under DOE (Department of Energy) but this is part of a whole-of-government approach,” Garin said in an online briefing in a mix of Filipino and English.
System loss charges are being collected by distribution utilities (DUs) to compensate for technical and non-technical causes, such as pilferage and system-related factors.
The DOE chief explained that BIR can only remove the excise tax on systems loss.
“Removal of the system loss would be either under EPIRA (Electric Industry Reform Act of 2001), the ERC, or in some parts NEA (National Electrification Administration) or the DOE,” Garin said
“And now we're working on the reduction, the gradual reduction up to zero, the gradual reduction of system loss itself. So, this will take time because we have to do it gradually so that our electric co-ops (cooperatives) won’t be affected. If we do it abruptly, they might have to absorb it right away, and this will entail a possible danger to their financial viability.”
Removal of the VAT on system loss is among the goals of the current Marcos administration to give power consumers’ some leeway on electricity cost.
The BIR’s decision is seen to reduce government revenues by around PHP10 billion annually, but Malacañang on Tuesday said there is no need to introduce new tax to offset this loss. (PNA)
