Bill removes VAT on system losses

A SENATOR on Monday filed a bill that will exempt system loss charge in electricity bills from value-added tax (VAT) in a bid to lower rising energy costs.

In a press statement, Senator Ana Theresia N. Hontiveros-Baraquel called the VAT on system losses as a “double burden” for consumers.

“The imposition of value-added tax on system loss effectively compounds costs borne by consumers,” Ms. Hontiveros said in the explanatory note of Senate Bill No. 2076. “Consumers should not be unduly taxed on inefficiencies within the power system that are beyond their control.”

The bill defined system losses as the difference between energy input or the energy delivered to the distribution system and the energy output which refers to the energy delivered to consumers.

The bill proposed amendments to Section 109 of the National Internal Revenue Code of 1997 which refers to the Exempt Transactions.

Ms. Hontiveros added the system losses to the exemption, also adding a provision directing the Energy Regulatory Commission to ensure that the reduction costs are not passed on to the consumers by means of distribution wheeling charges and other “pass-through components.”

“By removing the VAT on system loss charges, we are not just making our tax policies more fair and just — we are also providing immediate relief to consumers facing higher electricity bills this summer season,” she said. — Kaela Patricia B. Gabriel