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DOMESTIC
manufacturers have asked the Bureau of Internal Revenue
(BIR) to come out with a ruling stating that the system
loss being charged by the Manila Electric Co. (Meralco)
and other power-distribution utilities to their
consumers are “not VAT-able,” or not imposable with
value-added tax (VAT).
Besides
declaring that system loss cannot be assessed with VAT,
the Federation of Philippine Industries (FPI) also asked
BIR Commissioner Lilian Hefti to order the power
distributors “not to include the said charge in
computing the VAT due for the consumption of
electricity.”
“We
write to you to request for a confirmatory ruling that
the system loss being charged by the electric utilities,
Meralco included, is not a VAT-able transaction and
should, therefore, be excluded in the computation of the
total amount from which the VAT due in the electricity
bill is computed,” Jesus Arranza, FPI president, said in
a letter to Hefti dated June 27.
If
system loss will continue to be assessed with VAT,
Arranza said the BIR should charge it only up to the
level of the power distributors, as the system loss paid
by consumers can actually be considered income on their
part.
Arranza
noted that by virtue of the Electric Power Industry
Reform Act (Epira) and the Antipilferage Act of 2004,
system loss is now included in the computation of the
distribution retail supply rate or the gross selling
price, which is the total price paid for by end-users
consisting of the charges for generation, transmission
and related ancillary services, distribution, supply and
other related charges for electric service.
This
gross selling price is now used as the tax base for the
computation of VAT due from Meralco and other electric
companies. With the VAT being an indirect tax, the
payment is shifted by the electric firms to their
end-users, Arranza said.
System
loss, as defined, is the difference between the
generated power delivered to the power utilities and the
total of all the electricity consumed and accounted for
in the electricity bills of all end-users. It includes
technical losses, pilferages and the electricity used by
power utilities in their plants and administrative
offices.
The FPI,
a group of 38 industry associations and 74 corporations
that are large electricity users, noted that system loss
is not included in the classifications or transactions
outlined by law as VAT-able.
“By
paying the system loss, the end-user did not really
obtain any good, property or service,” the group said.
With
this, the FPI said the imposition of VAT on system loss
is confiscatory and violates the due-process principle
as the money of the taxpayer is being taken away without
due consideration.
“We will
appreciate your confirmation that Meralco and other
electric utilities’ system-loss charge is not subject to
VAT and should therefore be excluded in the tax base for
the computation of the VAT,” the group said. |
