Power Rates Are Not Double Taxed – DOF

In light of the statements made by the Energy Regulatory Commission (ERC), the Department of Finance’s (DOF) Secretary Carlos G. Dominguez has made it clear that power rates are not being double taxed. 

Secretary Dominguez goes on to clarify that the Electric Power Industry Reform Act (EPIRA) has unbundled the pricing of electricity at every stage of production. 

Due to this, the VAT is also implemented at every stage of production. 

Secretary Dominguez says “there is no double taxation in the electric power industry,” and mentions that  “But at the end of the day if you look at the total bill, the entire electricity service is charged 12 percent VAT on the side of the consumer.”

Double taxation occurs when two taxes will be imposed by the same taxing authority, same jurisdiction, same kind of character, during the same taxing period, for the same purpose and subject matter, according to Secretary Dominguez. 

The response of the DOF comes after ERC Chair Agnes Devanadera’s advice to the incoming Marcos administration to scrap the 12% VAT on the generation charge. The ERC also adds that the tax need only be applied to the distribution charge to avoid double taxation. 

“With this unbundled pricing mechanism, VAT is imposed on every level of the value chain and not integrated vertically like other sectors,”  says Dominguez. 

This would mean that “the VAT paid on the distribution charge only accounts for the value-added in distributing the electricity and does not include the generation and transmission of power.”

Source: Manila Bulletin