A party-list lawmaker has filed a bill seeking to remove the value-added tax (VAT) on system loss charges in electricity bills, arguing that Filipino consumers should not be taxed for power they never actually used.
Cong. Art C. Yap of Murang Kuryente Party-list filed House Bill No. 8415, which would exempt system loss — the electricity lost during the distribution process — from the 12-percent VAT currently imposed on electricity consumption.
“Hindi mo na nga nagamit, bubuwisan ka pa,” Yap, a lawyer, said, a Filipino phrase that translates roughly to: you didn’t even use it, yet you’re still being taxed for it.
System loss refers to electricity that dissipates or goes unaccounted for in the course of transmission and distribution, owing to technical inefficiencies and unauthorized connections.
Under existing billing practice, a portion of these losses — capped at 10 percent for private distribution utilities under rules set by the Energy Regulatory Commission (ERC) — is passed on to end-consumers and forms part of their monthly electricity bill.
Yap, a former Department of Agriculture secretary, said charging VAT on system loss runs counter to the fundamental nature of the tax.
“VAT is a consumption tax — you are taxed on what you consume,” he said in a radio interview. “You cannot tax something that was stolen, something that was never used.”
The Philippines levies a 12-percent VAT on electricity consumption under the National Internal Revenue Code, as amended by the Tax Reform for Acceleration and Inclusion (TRAIN) Law of 2017.
Prior to TRAIN, residential consumers using 200 kilowatt-hours or less per month were exempt from electricity VAT.
That exemption was removed under TRAIN, broadening the tax base and drawing criticism from consumer groups who said it disproportionately burdened low-income households.
On top of VAT, Filipino electricity consumers also pay a range of other charges reflected in their monthly bills, including generation, transmission, distribution, supply, metering, and various universal charges — making Philippine electricity rates among the highest in Southeast Asia.
Yap said HB 8415 aims to provide immediate and meaningful relief to Filipino families already squeezed by rising prices and the prospect of further power rate increases.
“At a time when Filipino families are already facing rising prices and the threat of further power rate hikes, this measure seeks to provide meaningful relief,” Yap said.
“Removing VAT on system loss is a fair and practical step toward easing the burden on our consumers.”
The lawmaker said he would push for the bill’s swift passage in the House of Representatives and its transmittal to the Senate for ratification into law.
“Our goal is to help Filipino families bring down their expenses,” Yap, also former governor of Bohol, said.
“We will continue pushing for policies that protect the welfare of Filipino households and ensure a more just and transparent energy system.”