ERC guards consumer interests on EVAT
“Power rate hike due to the EVAT is inevitable but we see to it that only the legitimate cost will be paid by the end-users,” Energy Regulatory Commission (ERC) Chairman Rodolfo B. Albano, Jr. assures the public, in the light of the Supreme Court decision giving the executive body the go-signal to implement Republic Act No. 9337 or the new Expanded Value-Added Tax (EVAT) law.
Beginning 01 November 2005, the new tax measure will be implemented based on gross receipts on sales and services of electricity by the generation, transmission, and distribution companies. Excluded from the gross receipts are Universal Charge, Benefits to Host Communities, and other taxes imposed under the Electric Power Industry Reform Act (EPIRA). Sale of power or fuel generated thru renewable sources of energy such as biomass, solar, wind, hydropower, geothermal, ocean energy, and other emerging energy sources using technologies such as fuel cells and hydrogen fuels are transactions subject to zero (0%) percent VAT rate.
The abolition of the two percent (2%) national franchise tax will cushion the impact of the ten percent (10%) VAT rate. However, they are not exempted from the local franchise tax being exacted by local government units (LGUs) to all franchise holders pursuant to their power to tax under the Local Government Code or Republic Act No. 7160. The President of the Republic can further increase the VAT rate of 10% to 12% starting January 2006 under certain conditions as prescribed by the EVAT law.
The new EVAT law revoked the exemption given to the National Power Corporation (NPC) from payment of VAT and the 0% VAT rate on the sales of generated power by generation companies. It also mandates the government or any of its agencies to, before paying on account of their electric bills, deduct and withhold a final VAT at the rate of five percent (5%) of gross payment and remit the same withholding to the Bureau of Internal Revenue (BIR) within ten (10) days following the end of the month the withholding was made.
The ERC is awaiting the issuance of the Revenue Memorandum Circular (RMC) by the Bureau of Internal Revenue (BIR) on the imposition of the EVAT which will guide it in the implementation of the appropriate VAT rate. A final resolution will be issued by the ERC not later than 01 November 2005 which will allow the generation companies, Transco, and all DUs to impose the VAT rate in accordance with the said Circular and the EVAT law itself.
In coming up with the Guidelines on the imposition of the EVAT law for the power sector, the ERC has conducted two (2) public consultations on 05 July 2005 and on 21 July 2005 to inform the public on the effect of EVAT on the rates of electricity and to seek their involvement.
October 26 , 2005