AN infrastructure-oriented think tank is calling for the suspension of value-added tax (VAT) and universal charges (UC) on power rates until community quarantines remain in place around the country.
“The suspension of VAT and universal charges on electricity rates during the coronavirus crisis translates to around P200 in savings for the average household consuming 200 kilowatt hour [kWh]. More important, this translates into a staggering P4.2-billion indirect economic aid to 21 million lower income households without the need for new loans, or the sale of government assets.”
This was the statement of Terry Ridon, Infrawatch PH convener and former urban poor chief of the Duterte administration.
Ridon said suspending VAT on power rates allows low income families more savings to spend on food and basic necessities.
“Every peso which we can add to the savings of Filipino families is already a win during this crisis. P200 affords families an additional 6 kilos of rice, without the need of fresh funding from government.”
Ridon, who was a former member of the House ways and means committee, said that VAT on power continues to be a very contentious issue because system losses, lifeline subsidies, and franchise taxes are levied with VAT.
“This is lazy, unsound policy-making inherited from previous administrations, as non-revenue activities are taxed. The President has the power to stop this, and now is the most perfect time.”
Ridon also said that universal charges can also be suspended, particularly receivables of the Power Sector Assets and Liabilities Management Corp. (PSALM) for the National Power Corp.’s (NPC) stranded debts and contract costs.
“Indirect economic aid to 21 million low income households from the suspension of PSALM universal charges amounts to P207 million. This is an intervention which the President can order at once, without question.”
Universal charges are imposed for the recovery of NPC stranded debts and contract costs and collected from electricity consumers on a monthly basis.
“Together with the Energy Regulatory Commission, PSALM can certainly make this heroic contribution to the country’s coronavirus effort by suspending collection until the worst is over.”