Mitigating factors are considered in the EVAT implementation - ERC reiterates
The Energy Regulatory Commission (ERC) would like to reiterate that it will always be on its toes to make sure that extensive review is undertaken and that mitigating factors are considered in the implementation of the Expanded Value Added Tax (EVAT). Rest assured that consumer protection and the electricity provider's viability are ERC's paramount concerns Chairman Rodolfo B. Albano, Jr. stated. This is in response to the call made by General Secretary of the Trade Union Congress of the Philippines (TUCP) and former Senator Ernesto Herrera for ERC and the National Power Corporation (NPC) to soften the impact of the EVAT.
The ERC, in Resolution No. 20 dated 07 November 2005, approved the Guidelines to Implement Republic Act No. 9337 or the new EVAT Law in the electricity sector. The said Resolution allows Generation Companies (GCs), the National Transmission Corporation (TransCo) and the Distribution Utilities (DUs) to impose the VAT on electricity sales consistent with Revenue Memorandum Circular (RMC) No. 61-2005 issued by the Bureau of Internal Revenue (BIR).
The new tax measure's implementation is 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). On the other hand, 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 also cushion the impact of the ten percent (10%) VAT rate. These, coupled with existing pricing policy for the marginalized consumers known as Lifeline rates, will help mitigate the impact of the EVAT.
The ERC Chairman also guarantees the electricity consumers that penalties including the corresponding VAT imposed on DUs by reason of their fault or negligence shall not be passed on to them.
"The ERC would like to emphasize that the electricity providers will not earn out of the VAT transactions. This is a pass through charge that is revenue-neutral. The ERC will perform a confirmatory process on VAT imposed by the Generation, Transmission, and Distribution Utilities," the Chief Regulator stressed.
December 22, 2005