Philippines House Bill Seeks to Remove 12% VAT on System Loss Charges

House leaders on Wednesday filed a bill seeking to remove the 12% Value Added Tax (VAT) on system loss charges reflected in electricity bills, a measure that President Ferdinand Marcos Jr. had urged Congress to pass during his fifth State of the Nation Address (SONA) last month. House Ways and Means Committee Chairperson Romero Quimbo of Marikina and Senior Deputy Speaker Ferdinand Hernandez of South Cotabato filed House Bill 10602. This bill mandates the removal of the 12% VAT on all recoverable distribution system loss charges that are approved by the state-run Energy Regulatory Commission (ERC) and appear on electricity bills. In a statement, Quimbo highlighted that the removal of VAT on system loss charges would reduce electricity costs for Filipinos while also acknowledging the realities faced by the country's power distribution sector. "Everyone agrees that consumers deserve lower electricity bills. Removing the VAT on system loss charges is a straightforward way of lowering electricity bills today. The question is how we provide that relief without unintentionally weakening smaller electric utilities and cooperatives that keep the lights on, particularly in far-flung communities," Quimbo stated. He further elaborated, "VAT is a tax imposed whenever value is added to consumption. Since it is not consumed by the consumer, no value is added, and therefore VAT should not be imposed. As Congress continues to fine-tune longer-term reforms, we can already correct one clear inequity: consumers should not be taxed on electricity they never actually consumed." Quimbo's panel is scheduled to hear bills that aim to scrap VAT on system loss charges on August 5 at 10 am. Earlier, Speaker Faustino "Bojie" Dy III of Isabela and Majority Leader Ferdinand Alexander "Sandro" Marcos of Ilocos Norte had filed House Bill No. 10430, which seeks to remove recoverable system loss charges under the Electric Power Industry Reform Act (EPIRA). This legislative move aims to provide tangible relief to Filipino households by lowering their monthly electricity expenses, while also considering the operational needs and sustainability of the power distribution sector.