The government is being urged to suspend the excise tax on coal and petroleum products and reduce the value-added tax (VAT) on generation charges to bring down power rates, an energy official said.
Energy Regulatory Commission (ERC) chairperson Agnes Devanadera said the move, once implemented, can be felt immediately by electricity consumers.
Devanadera made the proposal amid calls by presumptive president Ferdinand Marcos Jr. to bring down power rates.
She said the current generation rate of Manila Electric Co. (Meralco) due to the increasing coal and fuel prices is at P5.8724 per kilowatt-hour.
Before the implementation of the next excise tax rate under the TRAIN Law, the generation rate in the Meralco franchise area was at P5.8623 per kWh.
Devanadera said that if the excise tax rate under the TRAIN Law is suspended, the impact is about P0.0101 per kWh in Meralco’s franchise area but for missionary areas, the impact can be as high as P1.50 per kWh in the generation rate if the PhP6/li excise tax is removed.
“We at ERC, or I, would like to come up with some proposals, for example, there can be a temporary solution and there can be a permanent solution. The very immediate reason is we can go into suspension of the excise tax on the coal and the petroleum fuel products,” she said.
Devanadera said other countries provide subsidies for energy but in the Philippines, the government imposes taxes of about 12 percent.
“Because of this and some other factors, the Philippines is now one of the highest in terms of electricity rates in Southeast Asia. The actual cost that is being billed to us is reflective of the real cost as there is no subsidy,” she said.
The suspension of excise taxes will likewise have an impact on the transportation sector that rely 100% on fuel/petroleum products, Devanadera said.
She said the government should also look at the temporary reduction of VAT charges on the generation rate, which account for 50 percent of electricity bills.
The generation rate is subject to VAT of 12 percent, which is a major source of revenue for the government.
“A temporary and partial suspension of its collection in the energy sector can provide economic relief for electricity consumers. When we say temporary and partial, the current VAT rate of 12% can be reduced to 6%. In this way, the government will still have its source of tax albeit lower but at the same time, an economic relief can be felt by the electricity consumers,” she said.
Devanadera also called for the creation of a definite energy supply mix specific to technology and a specific target capacity increase every year.
“A concrete supply mix should have a definite figure as to how much should be the share of RE and share of other technologies like nuclear and natural gas. It should likewise have a target increase in capacity per year,” she said.
Devanadera’s other proposals also include continuation of fuel subsidy to public transport system, as well as the subsidy to farmers and fishermen, discontinuance of collection of universal charge and environmental charge, among others.