News Release
May 7, 2008
 
“A tax on a tax?”
POWER questions VAT implementation on power rates
 
The consumer group People Opposed Warrantless Electricity Rates (Power) today assailed the Value Added Tax on power rates saying this has given rise to “unjust and outrageous” tax burdens on the people.”
 
Power convenor Engr. Ramon Ramirez questioned the application of the VAT on items such as the franchise tax and systems losses.
 
“It’s like having a tax on a tax? The 12% VAT is levied on the franchise tax when the latter is computed as part of the distribution revenues and subsidies. In effect, the franchise tax is also taxed,” Ramirez said.
 
The “distribution revenue and subsidies” item is computed by adding the distribution charge, metering charge, supply charge, lifeline subsidies and the local franchise tax. A 12% VAT is then computed from the amount.
 
“This really doesn’t make much sense for consumers, to be taxed twice. This adds justification for our earlier calls to scrap the VAT on power rates. This will certainly save consumers a significant amount.
 
Power also questioned the rationale of charging the VAT on systems losses, a component of the Meralco bill.
 
“Systems losses are not exactly services rendered. They are costs that a distribution utility recovers from consumers because of pilferage and other inefficiencies in the system of delivering electricity. There is again an injustice here,” Ramirez said.
 
“We are being charged for a company’s inefficiency, then that same charge is taxed by government. It’s a double whammy,” he added.
 
Ramirez again cited a sample bill for a consumer using 293 kWh will be entitled to almost P469 in savings a month if the VAT on power is removed.
 
“This would be a big relief for consumers. Why doesn’t the government consider this proposal as an initial big step in lowering power rates,” Ramirez asked.