TUCP: Remove system loss charge, not just VAT, in bills

MANILA, Philippines — The Trade Union Congress of the Philippines (TUCP) has called for the removal of system loss charges in electricity bills on top of the 12-percent value-added tax (VAT), noting that this was the order of President Marcos in his State of the Nation Address (Sona) on July 27.

“Removing VAT only from system loss is simply too little, too late. More importantly, the President’s directive is to remove system loss, not merely the VAT imposed on system loss,” TUCP said in a statement.

“Consumers should not be made to shoulder a cost that does not arise from their own electricity consumption in the first place,” it added. The Bureau of Internal Revenue (BIR) on Monday confirmed the removal of the 12-percent VAT on the allowable system loss charge within the cap approved by the Energy Regulatory Commission.

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READ: Sona promise: Lower power bills as VAT on system loss out

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According to the Department of Energy, this could lower power costs for consumers by around 5 to 10 percent by mid-November. Under its Revenue Memorandum Circular No. 97-2026, the BIR now recognizes the allowable system loss charge as a government-mandated pass-through cost excluded from gross sales for VAT purposes.

System losses refer to electricity that is generated but lost during transmission and distribution. Under the 2001 Electric Power Industry Reform Act, power firms can charge a portion of system loss to consumers. —Gillian Villanueva