Second package of tax reforms seen to increase electricity prices

A consumer watchdog warned the implementation of the second package of the Tax Reform for Acceleration and Inclusion law will increase power prices.

“We are monitoring the removal of incentives in the power sector under the Train-2, particularly in  the renewable energy industry. Everything will be subjected to 12-percent value added tax,” Laban Konsyumer Inc. president and former Trade undersecretary Vic Dimaguiba said.

Dimaguiba said Train 2 would become an additional burden to the consumers, on top of the package one of the tax reforms.

He said the removal of the incentives might force developers to pass on the additional cost to consumers.  “It is part of the supply chain,” he said.

Section 15(g) of Republic Act No. 9513 or the Renewable Energy Act exempts renewable energy from the value added tax.

It states that “the sale of fuel or power generated from renewable sources of energy, such as but not limited to, biomass, solar, wind, hydropower, geothermal, ocean energy and other emerging energy resources such as fuel cells and hydrogen fuels, shall be subject to zero percent value-added tax.”

The National Geothermal Association of the Philippines earlier called for the the exemption of the Renewable Energy Law from the proposed Comprehensive Tax Reform Package 2 as it would affect the competitiveness of the geothermal industry.

The  Petroleum Association of the Philippines also asked the government to continue to grant incentives to the industry given its “high risk” nature.

PAP proposed that Presidential Decree 87 be excluded from Train 2,  which was being pushed by the Finance Department.

Train 2 seeks to reduce corporate income tax rates closer to the regional averages and modernize the fiscal incentives regime to attract the industries of the future and benefit micro, small and medium enterprises.

Finance Secretary Carlos Dominguez urged lawmakers to approve Train 2 so as “not to stop the train from moving forward”  as the first tax reform package provided the government the funds to help support its aggressive spending on infrastructure, education, health and social protection programs for the poorest of the poor.

Ibon Foundation cautioned against further inflationary surges once the next two rounds of additional taxes on oil products take effect in 2019 and 2020.

“The price increases from Train are very permanent and even if inflation rates moderate, this does not mean that prices will be lower. It is grossly deceitful for economic managers to give the impression or claim otherwise,” Ibon said. 

Senator Sherwin Gatchalian called for the swift implementation of energy sector reforms amid growing consumer uproar over high electricity rates in the country.

Topics: tax reforms , Tax Reform for Acceleration and Inclusion , Train-2 , electricity prices , renewable energy
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