DOF: VAT-free power fee may cost gov’t P10B

MANILA, Philippines — The government could lose an estimated P10 billion annually from the planned removal of the 12-percent value-added tax (VAT) on electricity system loss charges, the Department of Finance (DOF) said.

Speaking to reporters on the sidelines of an event, Finance Secretary Frederick Go confirmed the estimated revenue loss, saying the Bureau of Internal Revenue (BIR) is still awaiting the Energy Regulatory Commission’s (ERC) policy decision before processing the matter.

System losses refer to electricity that is generated but lost during transmission and distribution, with the cost recovered by power firms from consumers through the system loss charge.

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READ: Lawmakers seek to cut VAT on system loss charge in power bills

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In Resolution No. 26 published on Aug. 28, the ERC declared the system loss charge a government-mandated pass-through cost that would no longer form part of the gross sales of generation companies, the National Grid Corp. of the Philippines and distribution utilities. The resolution will take effect once the BIR issues the necessary confirmation.

READ: DOE: Scrapping ‘system loss’ charge may take a year

Distribution utilities will then have 60 days to modify their billing formats to reflect that the system loss charge is not subject to VAT.

The policy comes over a month after President Marcos, in his State of the Nation Address, called for the removal of system loss charges in electricity bills to ease the financial burden of Filipinos. —NYAH GENELLE C. DE LEON