E-VAT on Electricity: Short-circuiting the People’s Interest
Contributed to Bulatlat
At an average of 70 centavos per kwh and a total sale of about 24 billion kwh, electricity users in the Meralco franchise area will be contributing to the government a total of P17 billion every year. The government collects additional billions from the more than 120 electric utilities and electric coops in the country. It should be obvious why the Arroyo administration just have to impose the tax on power.
Upon the passage of the Value Added Tax (VAT) law, the Arroyo administration assured the public that the imposition of VAT on power will have very minimal impact on our electric bill. True to its form, the Arroyo administration has been caught lying again with the latest electric bill.
Taxed items are in abundance in the new electric bill. Clearly itemized are the E-VAT on the generation, transmission, system loss and power act reduction charges, which ranges from 6.44 percent to 7.96 percent. Hidden under the item “VAT for dist & subs” is the 10 percent E-VAT on the other charges – distribution, supply, retail customer, metering system, lifeline rate subsidy, interclass subsidy, Current Exchange Rate Adjustment (CERA), and local franchise tax. Possibly afraid of pushing its luck too far, the Arroyo administration has not yet taxed the two remaining cost items, namely, our forced contributions to the missionary electricity and environmental funds, which are in reality taxes disguised as contributions.
The table below are the actual charges and VAT for a consumption of 138 kwh:
The strange thing about the latest electric bill is that after slapping the electricity users with a local franchise tax of 0.57 percent on all the cost items, the Arroyo administration proceeds to impose a VAT on that tax! Meralco was awarded the franchise and enjoys the profit from it but it is the consumers who pay the tax on Meralco’s franchise; and the government taxes the payment for the franchise tax. Consumers reluctantly pay their electric bills only because they do not want to live in darkness, at least for now.
The EVAT has increased the residential electric bill by 9 percent.The E-VAT for customers in the 101-200 kwh category is 66 centavos per kwh. That is just another way of saying that to exercise their basic right to use electricity they have to pay the Arroyo administration 66 centavos per kwh. For customers in the 201-300 kwh category, it is 72 centavos. It is higher for those consuming more.
There are a few interesting items in the way the government, through the Energy Regulatory Commission (ERC), applied the EVAT on power.
For example, consumers are charged the systems loss, an amount consumers pay for electricity lost by Meralco because of pilferage and technical and administrative inefficiency. Some people steal electricity, government allows Meralco to make the honest customers pay for the loss, and the government joins in by taxing the same honest customers who have been made to pay by Meraco for the theft by other people to the tune of 6.52 percent of the systems loss. One’s faith in justice is certainly tested to the limit when one realizes what is going on here.
Customers pay – or, more accurately, donate – the 11.25 centavos per kwh lifeline rate subsidy to enable Meralco to give discounts ranging from 20 percent to 50 percent to poorer customers without Meralco losing money yet looking good before them because it does not say it collects from other customers to give to the poor. The funny thing is that even this forced generosity is taxed 10 percent. The Arroyo government just cannot resist the temptation to collect more money from electricity users, yet donations by wealthy people and rich corporations are tax-deductible.
The government also collects a 10 percent tax from electricity consumers on the CERA which is another tax item that is difficult to understand. Electric utilities borrow money or buy spare parts and materials abroad, and the CERA is an automatic cost-recovery formula that allows them to pass on to their customers the additional cost whenever the peso depreciates. Currently the CERA is 11.87 percent of the distribution charge. The government imposes the 10 percent EVAT on the CERA charge. Why should customers be charged a 10 percent tax on the CERA when they are even paying the cost of peso depreciation passed on to them by Meralco? They are already helping the company recover their losses from peso devaluation, yet we are taxed in the process.
But there are two bright spots in this EVAT thing. For example, consumers enjoy a discount of 21.39 centavos per kwh called inter-class subsidy as mandated by EPIRA which should have been removed last October 2005. Meralco promptly recovers the discount by collecting from its commercial and industrial customers. Residential consumers also enjoy a power act reduction discount of 11.40 centavos per kwh, a loss which Napocor absorbs as mandated by EPIRA. The people at ERC automatically imposes a 10 percent tax on both items..
Fortunately for consumers, the laws of mathematics are strictly observed by the computers at Meralco. Since each item is preceded by minus signs, the result of the 10 percent multiplication process on each item is also negative; consumers therefore pay a negative tax, which in the real world translates to an additional discount. Computer algorithm gives customers a few joys in this new year. Did the ERC people miss this? Congress should enact more laws that confuse the ERC people and benefit the people.
How much will the government earn from the VAT? At an average of 70 centavos per kwh and a total sale of about 24 billion kwh, electricity users in the Meralco franchise area will be contributing to the government a total of P17 billion every year. The government collects additional billions from the more than 120 electric utilities and electric coops in the country. It should be obvious why, despite the strong protests from the people, the Arroyo administration just have to impose the tax on power.
Meantime, some people hope that the money taken from almost empty pockets are spent wisely by the government, a phenomenon that has not been seen for a long, long time. But sometimes miracles reportedly happen once in a great while.